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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: I'm pleased to saying that we are now joined live

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Speaker 2: by former Kansas City FED President Esther. George Esther, thank

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Speaker 2: you so much for joining us today from where you

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Speaker 2: sit as a former regional FED president. Do you see

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Speaker 2: this as a legal dispute between President Trump and Lisa Cook,

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Speaker 2: the private citizen who applied for mortgages before she was

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Speaker 2: named to the FED board? Or is this more dispute

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Speaker 2: between President Trump and the Federal Reserve as an institution.

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Speaker 3: Yeah, well, good afternoon. I think clearly this is another

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Speaker 3: step in an ongoing pressure and attack on the institution

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Speaker 3: in terms of the authorities of the Executive branch relative

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Speaker 3: to the Federal Reserve. And so however this plays out

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Speaker 3: in terms of the details of the specific case that's

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Speaker 3: been brought forward, I think what's at stake here for

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Speaker 3: the American public is really to understand who will be

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Speaker 3: influential in the decisions that the Federal Reserve makes in

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Speaker 3: the years to come.

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Speaker 2: And personnel determines policy, as we've heard so many times

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Speaker 2: from this administration, and the concern here is that the

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Speaker 2: President will next target the appointments or the renewal of

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Speaker 2: appointments of regional FED presidents in February of next year.

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Speaker 2: How concern are you about that, Well.

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Speaker 3: I think it would be very concerning, and I'll tell

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Speaker 3: you why, Scarlett. If you think about the origins of

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Speaker 3: this institution, they were firmly anchored in making sure that

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Speaker 3: political pressure would be as limited as possible in terms

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Speaker 3: of the critical decisions that the Federal Open Market Committee

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Speaker 3: has to make for the long run. And so the

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Speaker 3: idea that you would structure the institution in a way

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Speaker 3: that would protect that long run view and not drive

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Speaker 3: it in the direction of short run decisions was critical,

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Speaker 3: and it proved to be relatively durable over the last

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Speaker 3: one hundred plus years. So that's what's at stake. I

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Speaker 3: think as we look at how this unfolds, is how

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Speaker 3: will the decision making process of this institution play out

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Speaker 3: and really take a more long term focus as opposed

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Speaker 3: to shorter term interest and esther.

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Speaker 1: How much of a distraction is this for FED officials. Again,

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Speaker 1: we do have a closely watched FED decision next month.

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Speaker 1: Given the back and forth with President Donald Trump.

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Speaker 3: Yeah, so there is a lot of noise going on,

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Speaker 3: and I think it's most unfortunate because there is already

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Speaker 3: enough uncertainty that's coming at the decision they have to

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Speaker 3: make relative to the performance of the economy. This is

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Speaker 3: a time as the economy is showing shifts, whether it's

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Speaker 3: from policy, whether it's from cyclical factors, that you really

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Speaker 3: want the Committee to be able to focus on the

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Speaker 3: debates they will be having at their meeting and September,

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Speaker 3: and I suspect they are doing their best to spend

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Speaker 3: their time focused on those key issues so that when

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Speaker 3: they come to the table in a few weeks they

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Speaker 3: can really make those decisions in a manner that serves

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Speaker 3: the public, serves the economy longer term.

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Speaker 1: And with that in mind, how does cutting interest rates

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Speaker 1: next month? Again, the market's pricing in an eighty five

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Speaker 1: percent chance, we have inflation still hotter than people were expecting,

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Speaker 1: we have a jobs market that is strong, and consumer

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Speaker 1: spending showing no signs of slowing down. So what does

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Speaker 1: that signal if and when we do get a FED

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Speaker 1: cut next month.

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Speaker 3: Well, I think that's at the center of the debate.

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Speaker 3: And we've heard the narrative that has come out of

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Speaker 3: the committee talking about the balance of risk, where they

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Speaker 3: see upside to inflation where they see downside potentially to

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Speaker 3: the jobs market. And of course next week we will

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Speaker 3: get another piece of what I call the economic puzzle,

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Speaker 3: to see how is the job market faring as they

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Speaker 3: come into this meeting. So the economy looks to be

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Speaker 3: performing pretty good. The decision is do they see something

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Speaker 3: ahead that suggests the economy will slow in away the

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Speaker 3: job market will be damaged in a way that requires

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Speaker 3: them to ease policy at a time when inflation is

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Speaker 3: holding in there pretty strong.

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Speaker 2: You point out the jobs report that's coming out next week.

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Speaker 2: We know that the president fired the head of economic

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Speaker 2: staticis statistics over at BLS, and we don't know whether

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Speaker 2: that will affect the quality of the data immediately or

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Speaker 2: in the long term, but it does open this door

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Speaker 2: to doubt creeping in over the quality of that data.

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Speaker 2: If you are sitting fed president still, how would you

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Speaker 2: broaden out your reliance on other data?

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Speaker 3: Well? As a regional fed president, Scarlet, you know that

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Speaker 3: there were a lot of confirming sources of data, so

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Speaker 3: obviously you do rely on official statistics to guide your

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Speaker 3: understanding of the economy. But when you serve a regional area,

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Speaker 3: as I did, some seven states. You spend a lot

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Speaker 3: of time talking to those that are working in the economy.

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Speaker 3: How are they making decisions six months ahead, twelve months ahead,

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Speaker 3: which give you tremendous insights to things like hiring, to

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Speaker 3: things like pricing for their products. So that is a

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Speaker 3: key component. It has always been a key component, and

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Speaker 3: I think at a time when you're beginning to see

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Speaker 3: a transition around thinking about the stance of policy, it

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Speaker 3: becomes ever more important for this committee to lean into

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Speaker 3: those anecdotal as well as their official statistics.

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Speaker 2: Right on the ground research that keeps you close by

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Speaker 2: to what your region is telling you. If the President

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Speaker 2: successfully remakes the FED to reflect his priorities, which is

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Speaker 2: lower rates and a lower rate cycle overall, what would

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Speaker 2: that mean for debates on things like the neutral rate,

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Speaker 2: the two percent inflation target, the framework overall? Do they

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Speaker 2: just become academic discussions and not as relevant to the

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Speaker 2: actual policy making.

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Speaker 3: So Scarlett, I don't know how those conversations will unfold, obviously,

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Speaker 3: but I think the point you make is this is

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Speaker 3: an institution, as with many institutions, that we want the

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Speaker 3: public to trust. We want the public to believe that

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Speaker 3: the decisions are made in the interest of long run

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Speaker 3: economic stability for this country, that growth can be promoted,

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Speaker 3: and if people begin to see cracks in the ability

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Speaker 3: to trust an institution making decisions on that basis, that

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Speaker 3: can be problematic. So we will continue to hope that

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Speaker 3: people that come into these roles will carry out that tradition,

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Speaker 3: carry out that very important role of focusing on what

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Speaker 3: serves the long term interest of this country.

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Speaker 2: Sir, we really appreciate your joining us today. A Sir

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Speaker 2: George is a former Kansas City fed at President. Thank

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Speaker 2: you so much.