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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily, we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg terminal. Michael McKee whether

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Speaker 1: wearing many hats this morning and right now we're going

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Speaker 1: to rapidly digress here to a gentleman like Paul Booker

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Speaker 1: from New Jersey, Raphael Bostick. What an interesting path out

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Speaker 1: of Harvard and Stanford, really first rate academics and a

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Speaker 1: different fed president Michael indeed, and now the president of

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Speaker 1: the Atlanta Federal Reserve, Rafael Bostick, and we welcome you

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Speaker 1: to Surveillance this morning. At you're in Atlanta, where it's

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Speaker 1: gonna be a lot warmer. I looked this morning, Rafael,

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Speaker 1: and it was thirty seven degrees out on the back

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Speaker 1: lawn of the Jackson Lake Lodge. So in some ways

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Speaker 1: we're better off. It's not as it's not as beautiful,

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Speaker 1: but in subways we're better off. Uh, let me ask

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Speaker 1: you first about the numbers that we just got four

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Speaker 1: point two percent on the year over year headline PC

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Speaker 1: three point six percent for the core. Is that out

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Speaker 1: of line at all with what you were anticipating? And

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Speaker 1: does that maybe put more pressure on you to decide

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Speaker 1: you would like to see sooner taper? Well, Mike, first

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Speaker 1: of all, I'm glad we're not sitting out in thirty

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Speaker 1: degree weather. Uh. That makes for a much less comfortable interview. Uh,

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Speaker 1: you know. And and for the numbers that came out today,

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Speaker 1: you know, I've I've been in studio, so I have

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Speaker 1: not a chance to look at the numbers, UM more deeply.

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Speaker 1: But I would say this sort of number is not

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Speaker 1: a It's not a huge surprise for me. We know

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Speaker 1: that there have been a lot of price pressures, UM,

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Speaker 1: and those have continued. UM. I heard you guys talking

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Speaker 1: before about the notion of transitory and you know when

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Speaker 1: I to businesses, but they've told me is that, UM,

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Speaker 1: this is episodic. They do believe that this is really

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Speaker 1: driven by the pandemic circumstance. But what it also become

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Speaker 1: clear is that this episode is gonna last longer than

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Speaker 1: people expected. So UM, we're trying, We're going to figure

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Speaker 1: out how to incorporate that into our modeling. I would say,

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Speaker 1: for me, what I'm seeing is really consistent with the

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Speaker 1: outlook that I had before. So I'm still comfortable that

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Speaker 1: we're on a good trajectory with the economy and we

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Speaker 1: should still see fairly robust growth. Llow, we put you

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Speaker 1: on the other side of that big mahogany table at

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Speaker 1: the FED and those who might argue for a delay,

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Speaker 1: is there an argument there because what seems to be

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Speaker 1: happening is a problem on the supply side, and you

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Speaker 1: guys address the demand side. Well, it's certainly true that

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Speaker 1: there are supply side challenges, and you know, you've, I've

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Speaker 1: we've all heard many stories about supply chain issues and

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Speaker 1: trying to get goods to product to meet the robust

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Speaker 1: demand that's out there. I definitely worried about that and

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Speaker 1: thinking about that. What I would also say, though, is

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Speaker 1: that what we have seen and businesses consistently tell me

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Speaker 1: they're getting having record volumes, the demand is super strong, uh,

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Speaker 1: And so I don't think that pushes in a different

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Speaker 1: direction than the types of things that we're thinking about

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Speaker 1: in terms of removing some of the accommodation. I think

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Speaker 1: the economy is performing extremely strong, and any weakness that

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Speaker 1: we're going to see is just pulling us off of

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Speaker 1: very high numbers. Initially, there seems to be a feeling

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Speaker 1: on Wall Street that if you end tapering, and particularly

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Speaker 1: if you do it quickly, that that will remove us

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Speaker 1: support from the equity markets. Uh. The FED has been

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Speaker 1: contributing to the big rise we have seen in the

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Speaker 1: indexes and maybe even to inflation with QUWI purchases. How

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Speaker 1: much do you worry about financial market stability with this

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Speaker 1: switch in policy coming up? Well, you know, I always

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Speaker 1: worry about financial stability. I think it's important that we

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Speaker 1: make sure that our financial system remains wrong and resilient

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Speaker 1: so they can provide the services that are needed for

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Speaker 1: our economy. Uh. What I do think though, in terms

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Speaker 1: of our policies is that we're really aimed at two

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Speaker 1: other things. We're looking at maximum employment and stable prices.

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Speaker 1: I think that we're doing a pretty well, uh, making

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Speaker 1: good progress in both, which suggests that we should be

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Speaker 1: trying to get our our our policies back into a

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Speaker 1: more normal situation. You know, we've been at a very

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Speaker 1: extreme level accommodation, and I think that the strength of

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Speaker 1: the economy calls for us to pull off of that

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Speaker 1: a little bit and let the economy stand on his own. Uh.

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Speaker 1: We still have a fair amount of energy momentum. I

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Speaker 1: think that we can do our tapering faster than we

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Speaker 1: have in previous episodes because of that momentum and my

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Speaker 1: expectations the economy will continue to operate in a strong way.

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Speaker 1: We were talking earlier about whether the inflation impulse that

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Speaker 1: we're seeing now will less longer than you anticipated. Is

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Speaker 1: the idea of getting the taper underway, and uh, you

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Speaker 1: have said, get it done fairly quickly, so that you

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Speaker 1: have some freedom to be able to address interest rates

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Speaker 1: if you need to. Well, I mean, certainly, I think

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Speaker 1: it's important that we move one tool, one lever at

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Speaker 1: a time. Uh. It's much more complicated to communicate what

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Speaker 1: we're trying to accost with policy if we're moving interest

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Speaker 1: rates and doing things and asset purchases at the same time. So,

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Speaker 1: you know, getting the asset purchases done is going to

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Speaker 1: be an important thing, uh, in terms of the sequencing

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Speaker 1: of our policy. But I do really think about them

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Speaker 1: in very different ways. UM. I think about a lot

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Speaker 1: of the asset purchase impetus coming out of the deep

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Speaker 1: recession that was triggered through the pandemic. UH. And as

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Speaker 1: the economy has moved further and further away from those

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Speaker 1: those lows, I think the need for the type that

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Speaker 1: uh those purchases starts to decline. UH. And at that point,

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Speaker 1: I think we should move on to other things. US

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Speaker 1: that's done. I think what I'm going to do is

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Speaker 1: really look at the data and have the data inform

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Speaker 1: me as to how I should be thinking about when

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Speaker 1: we should do lift off with interest rates. Right now,

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Speaker 1: I have the that projected as the end of two.

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Speaker 1: But you know, as I always say, a lot's going

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Speaker 1: to happen between now and then, UH, and that will

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Speaker 1: really inform the actual decision that we make in terms

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Speaker 1: of when we start to move interest rates. Well, when

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Speaker 1: you talk to CEOs in your district, or even the

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Speaker 1: mom and pop stores in your district, what are they

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Speaker 1: telling you about how long they think this inflation will last? Well? Yeah,

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Speaker 1: they actually don't talk about it usually in terms of inflation.

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Speaker 1: They talk about it in their ability to meet product demand.

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Speaker 1: And so business leaders UH that I talked to UH

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Speaker 1: tell me that the supply chain challenges are significant. What

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Speaker 1: we thought were going to be or what they thought

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Speaker 1: were going to be short term challenges are starting to

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Speaker 1: look like they're gonna last a bit longer into too UH,

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Speaker 1: and that has implications for what's going to happen in

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Speaker 1: terms of prices. But I do think and I think

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Speaker 1: it's important for everyone to keep this in mind. This

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Speaker 1: is all part of an episode, and so I've I've

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Speaker 1: moved away from transitory or permanent and really try to

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Speaker 1: talk about this as an episodic uh period of inflation.

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Speaker 1: And for me, with a long episode, the thing that

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Speaker 1: I'm going to be most concerned about is whether people

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Speaker 1: start to take the length of the episode as a

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Speaker 1: signal that they need to start doing things fundamentally differently.

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Speaker 1: Because if that's true, then a lot of the relationships

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Speaker 1: that we've seen historically may not hold any longer, and

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Speaker 1: we may do to think about our policies differently. So

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Speaker 1: a lot of the surveys that we're going to be

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Speaker 1: doing on inflation expectations and the like, um, those are

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Speaker 1: going to be the things that will inform what makes

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Speaker 1: the best sense for for policy moving forward. Raphail. The

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Speaker 1: theme of this conference the title is Macroeconomic Policy in

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Speaker 1: an uneven economy at this point. Do you think that

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Speaker 1: there one and twenty billion dollars of monthly bond purchase

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Speaker 1: is helps even out the unequal recovery or do you

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Speaker 1: think it exacerbates at this point given the recovery and

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Speaker 1: the labor market some of the inequalities, given the fact

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Speaker 1: that lower rates and better financial conditions tends to help

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Speaker 1: wealthier individuals more because of their assets. Well, you know,

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Speaker 1: I think of the purchases, the goal is really to

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Speaker 1: make sure that the economy stays robust so that people

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Speaker 1: come and get employed, because if you don't have a job,

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Speaker 1: then you're going to have a higher level of precariousness,

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Speaker 1: and that precariousness could trigger and translate into uh, significant hardships.

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Speaker 1: And I think so what I'm trying to weigh is

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Speaker 1: sort of, uh, the hardships or the potential for hardships

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Speaker 1: that many at the lower end of the wealth distribution

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Speaker 1: could could face without a strong economy versus some of

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Speaker 1: the benefits that are going to accrue to those at

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Speaker 1: the top because we have a strong economy. Uh. And

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Speaker 1: for me right now, the precariousness side is of more concern, uh,

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Speaker 1: in part because of how the pandemic has played out.

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Speaker 1: We know that in this pandemic, jobs at the lower

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Speaker 1: end of the wate retributionn't have been hit much harder,

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Speaker 1: and so there is an imperative that we make sure

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Speaker 1: our policies are in position so they can come back

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Speaker 1: more quickly. Uh. That is starting to happen now, and

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Speaker 1: and for me, I found it heartening that a lot

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Speaker 1: of those gaps in terms of job losses and categories

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Speaker 1: are starting to narrow, and that gives me some comfort

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Speaker 1: that the policies have been effective. Mike McKie, why don't

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Speaker 1: you drop in here for one final question with the

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Speaker 1: good President from Atlanta. Well, let me point out that

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Speaker 1: the Good President from Atlanta is one of the voting

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Speaker 1: members of the Open Market Committee this year, So what

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Speaker 1: you say really matters. And I'm wondering, I'm sitting here

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Speaker 1: listening to what you're saying, and I'm thinking of the

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Speaker 1: how the print headlines are gonna say. You know, Bostick

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Speaker 1: joins group of hawks. I'm wonder if this is really

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Speaker 1: hawkish or if it's just time? Um is there? At

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Speaker 1: some point would anybody notice in terms of market interest

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Speaker 1: rates if you start cutting back on QUEWI purchases. So

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Speaker 1: I actually think that the markets will not respond very

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Speaker 1: strongly to this UM. The economy is in a very

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Speaker 1: strong way and strong position, and I think the UH

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Speaker 1: asset purchases at this point have been something of an

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Speaker 1: insurance policy. I think that we don't need that insurance

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Speaker 1: nearly as much as we have in previous episodes. Because

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Speaker 1: of that, I think the markets are going to really

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Speaker 1: absorb this pretty smoothly. And UH, we'll we'll see the

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Speaker 1: economy continues to just roll on. Raphael Bostick, You more

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Speaker 1: than anyone I know inside the Beltway has thought harder

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Speaker 1: and harder about our nation's social policy, our fabric, your

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Speaker 1: CV out of USC, etcetera. Is extraordinary. You talk years

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Speaker 1: ago about trying to get the doors wider in America,

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Speaker 1: having you do with housing in the black experience in America.

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Speaker 1: Where are we right now? Can our institutions and particularly

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Speaker 1: this FED get the doors open wider? Well, you know,

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Speaker 1: I think we're definitely gonna try. And let me step

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Speaker 1: back and start by saying, you know, the gaps in

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Speaker 1: homeownership or as large as they've ever been since we

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Speaker 1: started tracking this, UH, and that means that there is

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Speaker 1: a challenge that we face in terms of UM families

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Speaker 1: of of African, American and Latino backgrounds UM getting assets

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Speaker 1: that allow them to accrue wealth. What I'll tell you

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Speaker 1: is for the FED, our monetary policy and the policy

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Speaker 1: framework that we announced last year is really designed to

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Speaker 1: make sure that the employment market, the labor markets work

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Speaker 1: better for all UH. And we are also advancing a

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Speaker 1: number of other things we're convening. So we have a

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Speaker 1: Racism in the Economy series to highlight a number of

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Speaker 1: the barriers and potential solutions. We're working for, solutions in

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Speaker 1: communities to try to make those differences to really change

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Speaker 1: how the economy works for people UH and make sure

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Speaker 1: their institutions are well positioned to succeed. So I think

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Speaker 1: there's progress that can be made and I'm gonna work

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Speaker 1: hard with my colleagues to a push to make that happen.

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Speaker 1: Dr Boston, thank you so much for joining us today.

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Speaker 1: What I love about this, folks, is everybody has a

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Speaker 1: different path to their economic excellence. And Michael McKee, I

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Speaker 1: don't think I've ever said this to see someone of

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Speaker 1: interesting business academics and then took the toughest job in

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Speaker 1: the country no, not the chairman of the FED. The

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Speaker 1: president of the University of Delaware. That's a tough job.

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Speaker 1: That was a tough job. And Pat Harker just totally

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Speaker 1: bailed on that. Excuse me, the president of the Philadelphia Fed,

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Speaker 1: and he joins us. Now, thank you very much for

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Speaker 1: joining us. Pat, And as I mentioned Roba El earlier,

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Speaker 1: we are a lot warmer here in the studio, and

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Speaker 1: I'm sure you are in Philadelphia, then we would be

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Speaker 1: on the back lawn at Jackson Lake Lodge where it

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Speaker 1: was thirty seven degrees a short time ago. Uh, I'm

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Speaker 1: wondering about heat. In terms of inflation, we got inflation

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Speaker 1: numbers today. The headline PCE goes up to four point

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Speaker 1: two percent, faster than you had anticipated and higher than

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Speaker 1: had been anticipated by the Fed. Does that suggest to

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Speaker 1: you that we might need to see uh, and I

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Speaker 1: know taper comes first, but that we might need to

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Speaker 1: see interest rates rise sooner than the market has been expecting. First.

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Speaker 1: Good morning. Yeah, we're a little warmer, although I do

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Speaker 1: miss the view. The view from my my office is

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Speaker 1: my home office is a lot different. And go fighting

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Speaker 1: blue hands, go University of Dolaware. So yeah, so on inflation.

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Speaker 1: I mean, clearly it is a concern. Um. The word

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Speaker 1: transitory I think has been used probably in some ways

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Speaker 1: too much. Uh. But there are clearly sectors of the

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Speaker 1: economy which are accelerating faster than others. That's always the case.

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Speaker 1: The question in my mind to watch on inflation is

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Speaker 1: are we seeing spillover from these COVID infected sectors to

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Speaker 1: the non COVID infected sectors and our expectations becoming unanchored

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Speaker 1: so far on the latter point, the answer is no,

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Speaker 1: but it is clearly something we need to watch. And

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Speaker 1: what we're hearing from our business contacts is that this

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Speaker 1: may be longer lasting than we had expected they had expected,

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Speaker 1: So is clearly a risk that we have to be

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Speaker 1: cognizant of with respect to policy. Are those people telling

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Speaker 1: you that they're going to have to keep raising prices

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Speaker 1: in order to make up their margins? R I hear

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Speaker 1: from our contacts business contexts they're working very hard not

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Speaker 1: to raise prices. They are seeing some increase in productivity.

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Speaker 1: Good news. This We are seeing across the economy and

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Speaker 1: in individual sectors increases in productivity, which helps to mitigate

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Speaker 1: some of the challenges they're facing but that doesn't completely

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Speaker 1: get rid of them. So yeah, they're they're concerned about

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Speaker 1: this right now. I think generally they're very concerned. One

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Speaker 1: major national homebuilder I was talking to you recently said,

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Speaker 1: you know, the supply chain disruptions we taught were temporary.

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Speaker 1: It looks as temporary as we thought. They will eventually

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Speaker 1: solve themselves, like appliances, But right now they're putting in

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Speaker 1: used appliances and the new homes and promising to deliver

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Speaker 1: a new appliance because they simply can't get the appliances

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Speaker 1: in that case because of chips. To a large extent,

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Speaker 1: we think about cars and chips, Well, there are chips

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Speaker 1: in your dishwasher, and sometimes they don't work in my dishwasher.

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Speaker 1: If if the rest of the Open Market Committee follows

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Speaker 1: your advice and decides to start tapering fairly soon, what

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Speaker 1: kind of message does that send at a time time

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Speaker 1: when people are very unsure about the impact of COVID

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Speaker 1: on the economy. So delta is clearly a problem, and

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Speaker 1: the next one. It's not just going to be delta.

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Speaker 1: First and foremost. We've got to get this endemic under

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Speaker 1: control under way. To do that is get people vaccinated.

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Speaker 1: It started with a health crisis. It's going to end

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Speaker 1: by solving the health crisis, not by raising rates or

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Speaker 1: lowering rates. So we need to keep that first and

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Speaker 1: foremost right in front of our mind, and we need

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Speaker 1: to tell everybody. So yeah, I mean, given that, given

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Speaker 1: that this is a health crisis, I think we need

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Speaker 1: to follow. As our colleagues and Raphael was just on

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Speaker 1: have said, we really need to follow the data and

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Speaker 1: see how things turn out over the next couple of months.

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Speaker 1: We put these systems in place. We put this accommodation

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Speaker 1: in place because of the health crisis, and we will

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Speaker 1: be able to remove it now because we are slowly careful.

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Speaker 1: We chipping away at the health crisis, but we're not

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Speaker 1: there yet. We talked a lot about inflation this morning,

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Speaker 1: but what about the labor market? Of the committee and

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Speaker 1: it's minutes of the last meeting suggested you've made progress,

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Speaker 1: but not nearly enough. And even if we get a

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Speaker 1: similar jobs report next Friday to what we had, you're

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Speaker 1: still gonna be about six million short. I'm wondering if

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Speaker 1: you expect to make up that difference very quickly, or

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Speaker 1: if the participation rate is going to stay low and

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Speaker 1: that might change your thought about the proper path for policy.

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Speaker 1: To separate two things there, it's a good question. One

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Speaker 1: is the path of policy, but also, uh, what is

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Speaker 1: causing this? Uh, what's causing this? It's not a lack

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Speaker 1: of demand. It's clearly not a lack of demand. We

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Speaker 1: see that in the JULT data, lots of open jobs.

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Speaker 1: People are still concerned about coming back to work. People

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Speaker 1: are concerned about getting on transit thing city like Philadelphia

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Speaker 1: to get to the workplace. People are concerned about going

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Speaker 1: to the restaurant with the delta variant, etcetera, etcetera. And

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Speaker 1: so again. Until we solve those problems and childcare and

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Speaker 1: all the other things holding people back from entering the workforce,

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Speaker 1: that's going to be an issue. Unemployment insurance is rolling off,

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Speaker 1: I mean the expanded unemployment insurance. We are starting to

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Speaker 1: see some of those early early results from some states

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Speaker 1: that removed the federal unemployment early. Yeah, you know, it

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Speaker 1: doesn't seem like that's having a huge impact on getting

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Speaker 1: more people into the labor force. It's these other factors life,

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Speaker 1: but simply as life right, taking care of kids, taking

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Speaker 1: care of elderly parents, getting to and from work, it's

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Speaker 1: causing us. So what does that mean for policy? If that,

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Speaker 1: if what I just said is true, then adding accommodation

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Speaker 1: or keeping highly accommodative policy is not going to solve

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Speaker 1: that problem. It's not going to close back gap. It's

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Speaker 1: not a demand problem, it's a supply problem. Well within

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Speaker 1: the Patrick Carker, I think you're best situated of anybody

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Speaker 1: within the FED. I note that the Philadelphia FED was

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Speaker 1: four or five of the American population sitting on one

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Speaker 1: percent of the land. It's a micro cosm of this nation.

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Speaker 1: The manufacturing index back great. What do you hear from

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Speaker 1: the small, the mid and the large business people of

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Speaker 1: your district? So they're nervous. I mean, I think generally

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Speaker 1: people are nervous and about what the future holds. But

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Speaker 1: that said, they are seeing lots of demand. I mean,

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Speaker 1: our manufacturing contacts are manufacturing business Outlook survey. Although it's

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Speaker 1: ticked down a little bit in terms of future activity,

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Speaker 1: it's still an expansionary territory. Their biggest problem, and you

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Speaker 1: know this is getting skilled labor. And by the way,

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Speaker 1: we should put this in context and some of the

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Speaker 1: work we're doing in the Philly FED. This problem of

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Speaker 1: skilled labor and labor generally with us before the pandemic hit.

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Speaker 1: The pandemic has just exascerbated the problem, it hasn't created

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Speaker 1: the problem. We still need long term structural solutions to

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Speaker 1: solving our labor woes, and that's kind of work we're

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Speaker 1: doing in our community development function at the Philly Fed

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Speaker 1: and really across the federal reserve system. Well. At the

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Speaker 1: Philly Fed, you said something that I think is just

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Speaker 1: fascinating Patrick, that some of the supply side issues that

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Speaker 1: we're seeing in the labor market, the frictions there are

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Speaker 1: not solved by monetary policy. This isn't something that holding

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Speaker 1: rates low for a longer period of time or even

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Speaker 1: up trying a hundred twenty billion dollars of bonds every

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Speaker 1: month is going to solve in its own right. So

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Speaker 1: how do you determine the potential negative ramifications from the

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Speaker 1: ongoing a hundred twenty billion dollars of purchases with the

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Speaker 1: lack of influence, frankly on solving these labor market dynamics.

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Speaker 1: So I have been on record and I continue to

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Speaker 1: be on record that I would like to start papering

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Speaker 1: sooner rather than later. I'd like to start it sooner

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Speaker 1: rather than later. And I like to keep keep it

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Speaker 1: as simple as possible. The old engineer, and I'm trained

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Speaker 1: as an engineer, you know, the old kiss principal, keep

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Speaker 1: it simple, stupid. Let's just start this process. Let's get

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Speaker 1: that over with and then we can start to think

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Speaker 1: about the FED funds rate and normalizing the FED fundry.

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Speaker 1: We're not there yet. I'm still forecasting late probably twenty

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Speaker 1: three before we do lift off. But let's get the

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Speaker 1: capering process underway. Mike, let's engineer this Jackson hole right now?

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Speaker 1: Is this the Jackson hole? A complexity or simplicity? As

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Speaker 1: a president speaks of, Well, it depends on whether you're

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Speaker 1: reading the papers which are complex, or whether you are

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Speaker 1: talking about raising interest rates or starting to taper. I'm wondering, Pat,

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Speaker 1: if you think that starting to taper is going to

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Speaker 1: have an impact uh this soon on the whole FED,

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Speaker 1: the new framework. Uh, the idea that you're waiting. Will

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Speaker 1: people take that the wrong way and think that you're

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Speaker 1: giving up too soon? They might, But again I don't

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Speaker 1: think that's that's appropriate. Uh. We have achieved our inflation

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Speaker 1: goal essentially, I mean we're above two again. Good news,

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Speaker 1: is explications have not become an anchored But we are

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Speaker 1: averaging about two percent and keeping this accommodation through tapering

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Speaker 1: there for a long period of time. Uh. And it's

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Speaker 1: not solving the labor problem. That's not the problem. Just

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Speaker 1: look at how many jobs are open in the US economy,

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Speaker 1: the jokes data. I just think it's the proven thing

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Speaker 1: to do to just take this first move and then

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Speaker 1: let's see how things play out before we think about

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Speaker 1: any change in At that country, we talked about whether

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Speaker 1: or not the FED has contributed to inflation by propping

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Speaker 1: up asset prices. A lot of people have said fiscal

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Speaker 1: policy is contributing to inflation by putting a lot of

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Speaker 1: money into the economy and now down and watching in

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Speaker 1: their debating hundreds of billions more. Are you worried that that?

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Speaker 1: Leaving aside the political merits of this, are you worried

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Speaker 1: it could be inflationary? Let's start with what we know

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Speaker 1: almost exists, not done yet, but the infrastructure bill. As

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Speaker 1: an old civil engineer, I'm all for fixing our infrastructure.

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Speaker 1: It's in woeful shape across our economy. We need to

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Speaker 1: fix it. So what's the implication, what impact will that

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Speaker 1: have on the economy. Well, I mean the evidence I've seen,

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Speaker 1: at least the modeling i've seen, you know that chillion

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Speaker 1: dollars will have maybe one two tenths of a percent

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Speaker 1: impact on GDP. So we're not talking about a huge

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Speaker 1: overall impact in certain sectors, absolutely, but not overall. My

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Speaker 1: biggest concern right now is not that it's going to

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Speaker 1: overstand that bill itself is going to overstimulate the economy,

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Speaker 1: is that where are we going to get the labor,

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Speaker 1: the skilled labor, to fix the roads, to do the

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Speaker 1: broad bad work, and so forth. That we need a

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Speaker 1: really intensive effort to get people into the labor force

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Speaker 1: with those skills. Now, the broader issue of the three

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Speaker 1: three and a half trillion that is right now, I

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Speaker 1: don't have picks opinion on that because really that's a

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Speaker 1: moving target every single day, and it's very hard to model, uh,

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Speaker 1: such a moving target. All right, very quickly, pat next Thursday,

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Speaker 1: September two, Delaware Blue Hens versus the Black Bears of Maine. Winner. Well,

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Speaker 1: I'm always going to go with the blue Hens. Come on,

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Speaker 1: everyone will be fully vaccinated. Petrick Harker, thank you so much, greatly,

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Speaker 1: greatly appreciated this morning. The voice of Philadelphia. This is wonderful, folks,

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Speaker 1: because it's a changeable feast of what the FED invented,

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Speaker 1: the geography of the nation, and Michael McKee, it's pretty

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Speaker 1: simple to say the culture of the fabric of Philadelphia

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Speaker 1: radically different what capital holds court in in Dallas. Yes,

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Speaker 1: certainly the lture is a little bit different. Robert Kaplan

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Speaker 1: much more likely to be wearing cowboy boots than Pat Harker.

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Speaker 1: Robert Kaplan is the president of the Dallas Federal Reserve.

430
00:25:09,280 --> 00:25:11,639
Speaker 1: And this is, I guess, uh, Rob a little bit like, Uh,

431
00:25:11,960 --> 00:25:14,680
Speaker 1: we're all sitting around the table at the FED meeting,

432
00:25:14,720 --> 00:25:16,879
Speaker 1: the Open Market Committee meeting, because each one of you

433
00:25:17,040 --> 00:25:20,439
Speaker 1: is getting, in turn your chance to describe the economy. Uh.

434
00:25:20,560 --> 00:25:24,119
Speaker 1: Let's let's ask you, um in Dallas, in the in

435
00:25:24,160 --> 00:25:29,000
Speaker 1: your region, what are CEOs and company officials saying about

436
00:25:29,280 --> 00:25:33,040
Speaker 1: whether this inflationary spike that we've seen is going to

437
00:25:33,119 --> 00:25:37,160
Speaker 1: continue because maybe COVID is going to disrupt supply lines

438
00:25:37,160 --> 00:25:42,359
Speaker 1: even longer. What they're gonna what they're saying is the

439
00:25:42,520 --> 00:25:46,840
Speaker 1: materials supply demand balances are gonna last longer than people

440
00:25:46,880 --> 00:25:52,280
Speaker 1: may be expecting. Now certain material imbalances are going to

441
00:25:52,359 --> 00:25:56,760
Speaker 1: get resolved. That semiconductors. My contexts are telling me it

442
00:25:56,800 --> 00:26:01,640
Speaker 1: could take much longer to see those balances resolved. One

443
00:26:01,640 --> 00:26:04,360
Speaker 1: of the reasons is a lot of the changes we're

444
00:26:04,400 --> 00:26:07,880
Speaker 1: making to the economy. Electrification of the auto grid, for example,

445
00:26:08,160 --> 00:26:11,239
Speaker 1: takes a lot of semi conductors, and so we're going

446
00:26:11,280 --> 00:26:14,440
Speaker 1: to produce more semi conductors, but demand is growing. So

447
00:26:14,480 --> 00:26:19,400
Speaker 1: that's the that's the materials. The one that I think

448
00:26:19,520 --> 00:26:22,679
Speaker 1: is gonna be even more persistent is the labor supply

449
00:26:22,840 --> 00:26:28,080
Speaker 1: demanding balances and that we've had three million retirements since February.

450
00:26:28,200 --> 00:26:30,199
Speaker 1: We have a million a quarter million half people who

451
00:26:30,240 --> 00:26:32,480
Speaker 1: have left the workforce to be caregivers. You have a

452
00:26:32,520 --> 00:26:38,159
Speaker 1: fear of infection, and broadly, businesses are becoming resolved to

453
00:26:38,240 --> 00:26:42,760
Speaker 1: the idea it's gonna be hard to attract labor. They're

454
00:26:42,800 --> 00:26:46,040
Speaker 1: gonna pay more. The wage increases are are certainly for

455
00:26:46,160 --> 00:26:50,160
Speaker 1: labor welcome. But I think businesses are actively thinking about

456
00:26:50,280 --> 00:26:53,760
Speaker 1: how to manage their business, and if they're a big business,

457
00:26:54,000 --> 00:26:57,040
Speaker 1: they're going to use more technology more scale. Small mid

458
00:26:57,119 --> 00:27:01,000
Speaker 1: sized businesses, the only thing they option they have is

459
00:27:01,040 --> 00:27:04,960
Speaker 1: to raise prices. UH and they're doing that, and they're

460
00:27:04,960 --> 00:27:08,679
Speaker 1: more confident that they can raise prices and have them stick. Well,

461
00:27:08,720 --> 00:27:10,920
Speaker 1: I'm sure you've probably heard Pat Harker just a moment

462
00:27:10,960 --> 00:27:13,280
Speaker 1: ago talking about if we get this stimulus bill, the

463
00:27:13,320 --> 00:27:17,359
Speaker 1: infrastructure bill, we could see inflationary impacts because there aren't

464
00:27:17,440 --> 00:27:20,639
Speaker 1: enough workers. How much do you worry that inflation is

465
00:27:20,680 --> 00:27:25,439
Speaker 1: going to be embedded in these companies thoughts going forward

466
00:27:25,520 --> 00:27:30,200
Speaker 1: because they can't find workers. Uh. I think these labor

467
00:27:30,240 --> 00:27:32,600
Speaker 1: supply demand and balances will be with us for an

468
00:27:32,640 --> 00:27:35,600
Speaker 1: extended period. So so do I worry about I think.

469
00:27:35,800 --> 00:27:38,000
Speaker 1: I think it's going to be part of our economy,

470
00:27:38,040 --> 00:27:44,160
Speaker 1: a feature of our economy. And uh I think that

471
00:27:44,560 --> 00:27:47,399
Speaker 1: as a result of that. Are our year end at

472
00:27:47,400 --> 00:27:51,199
Speaker 1: the Dallas FT, our year end PC inflation forecast is

473
00:27:51,240 --> 00:27:54,160
Speaker 1: three point a three point nine percent. I could see

474
00:27:54,160 --> 00:27:56,760
Speaker 1: affirming even to four percent by the end of the year.

475
00:27:57,320 --> 00:28:01,560
Speaker 1: We think the extreme moves will moderate, like used car prices,

476
00:28:01,840 --> 00:28:04,720
Speaker 1: some of those extreme moves from the reopening will moderate,

477
00:28:05,119 --> 00:28:09,240
Speaker 1: but we we think price pressures will broaden because of

478
00:28:09,280 --> 00:28:13,080
Speaker 1: these some of these persistent imbalances, particularly on labor. So

479
00:28:13,200 --> 00:28:15,320
Speaker 1: headline for next year we think right now is in

480
00:28:15,359 --> 00:28:17,520
Speaker 1: the range of two and a half percent, and I

481
00:28:17,560 --> 00:28:21,640
Speaker 1: could see us, you know, revising that up versus down

482
00:28:21,720 --> 00:28:24,160
Speaker 1: as we go through the next few months. So I'm

483
00:28:24,200 --> 00:28:26,840
Speaker 1: watching it carefully. And we've got a commitment at the

484
00:28:26,880 --> 00:28:30,560
Speaker 1: FED to anchoring average inflation at two percent. We're willing

485
00:28:30,560 --> 00:28:33,399
Speaker 1: to run moderately above. We've also got a commitment to

486
00:28:33,440 --> 00:28:37,720
Speaker 1: anchor it. And low moderate income communities I'm talking to

487
00:28:37,880 --> 00:28:41,840
Speaker 1: actively are seeing a greater share of their wallet going

488
00:28:41,960 --> 00:28:47,120
Speaker 1: to to uh, you know, gasoline, food, rents, autos, and

489
00:28:47,360 --> 00:28:52,240
Speaker 1: they're they're, they're, they're they're feeling that those effects. Well,

490
00:28:52,240 --> 00:28:55,840
Speaker 1: I know your two thousand twenty two guy for raising

491
00:28:55,880 --> 00:28:58,000
Speaker 1: interest rates, and you also want to get the taper

492
00:28:58,120 --> 00:29:01,880
Speaker 1: over with. Is it possible that, uh, we see the

493
00:29:01,960 --> 00:29:05,640
Speaker 1: Fed have to move up the date of liftoff for

494
00:29:06,160 --> 00:29:11,320
Speaker 1: the Fed funds rate. Uh. I've been very careful with

495
00:29:11,520 --> 00:29:16,640
Speaker 1: emphasize that decisions on the asset purchases should be separated

496
00:29:16,880 --> 00:29:19,760
Speaker 1: from decisions on the Fed funds rate. We've got a

497
00:29:19,840 --> 00:29:23,080
Speaker 1: number of months and into next year to assess how

498
00:29:23,080 --> 00:29:26,840
Speaker 1: the economy unfolds, how these dynamics unfold. Will make that

499
00:29:26,920 --> 00:29:29,880
Speaker 1: judgment next year. I do believe we should start the

500
00:29:29,920 --> 00:29:35,520
Speaker 1: asset persons adjustment process soon. I mean literally as soon

501
00:29:35,560 --> 00:29:38,240
Speaker 1: as possible. And I would like to see us move

502
00:29:39,000 --> 00:29:43,880
Speaker 1: do that process gradually over stay eight months. Uh, And

503
00:29:44,240 --> 00:29:46,320
Speaker 1: I think we've got to get started on that, and

504
00:29:46,360 --> 00:29:49,400
Speaker 1: I think the extent we get moving on that, it

505
00:29:49,440 --> 00:29:53,120
Speaker 1: may actually give us more flexibility down the road on

506
00:29:53,200 --> 00:29:55,440
Speaker 1: our decisions on the FED funds. Right if you're just

507
00:29:55,520 --> 00:29:57,719
Speaker 1: joining us, Robert Kepit of the Dallas Fed with us

508
00:29:57,720 --> 00:30:00,920
Speaker 1: on radio and television worldwide as we elebrate what we

509
00:30:01,000 --> 00:30:05,160
Speaker 1: do at Bloomberg and all of Bloomberg surveillance is economics.

510
00:30:05,200 --> 00:30:08,080
Speaker 1: Michael McKee leading our coverage in this hour as we

511
00:30:08,120 --> 00:30:10,160
Speaker 1: go to the speech of the Chairman of the Federal

512
00:30:10,240 --> 00:30:14,880
Speaker 1: Reserve System and we see show you worldwide the geography

513
00:30:14,920 --> 00:30:18,800
Speaker 1: of this nation, from Philadelphia to Caplan's Dallas and on

514
00:30:19,200 --> 00:30:22,520
Speaker 1: to Bullard St. Louis as well. Robert Caplan, good morning

515
00:30:23,000 --> 00:30:26,120
Speaker 1: to you. You know, I bust your chops about Dallas

516
00:30:26,200 --> 00:30:29,760
Speaker 1: research because you're the only Fed president that actually reads

517
00:30:29,800 --> 00:30:36,360
Speaker 1: his research. You have a spectacular research piece linking surging

518
00:30:36,520 --> 00:30:41,080
Speaker 1: home prices into rent inflation and buried in Jim Dolmus's

519
00:30:41,160 --> 00:30:46,280
Speaker 1: peace is six point nine percent rent increases in two

520
00:30:46,360 --> 00:30:52,160
Speaker 1: thousand twenty three. Is your FED ready for that? Uh?

521
00:30:52,200 --> 00:30:56,000
Speaker 1: I think low modern income communities are not ready for that,

522
00:30:56,240 --> 00:30:59,880
Speaker 1: and they're they're very cognizant of having to deal with it.

523
00:31:00,320 --> 00:31:05,320
Speaker 1: And I think while I think what we're saying, uh,

524
00:31:05,520 --> 00:31:07,880
Speaker 1: part of our two and a half percent plus forecast

525
00:31:07,960 --> 00:31:11,840
Speaker 1: for next year is we need to anticipate this appreciation

526
00:31:11,880 --> 00:31:15,080
Speaker 1: at home prices is gonna is going to translate into

527
00:31:15,160 --> 00:31:18,080
Speaker 1: higher rents down the road, and that's got to be

528
00:31:18,160 --> 00:31:21,640
Speaker 1: part of our thinking. It's been highly publicized rob that

529
00:31:21,840 --> 00:31:23,720
Speaker 1: and FED Chair J. Powell seems to be a little

530
00:31:23,720 --> 00:31:26,240
Speaker 1: bit more dubbish or a little bit more patient when

531
00:31:26,280 --> 00:31:28,360
Speaker 1: it comes to the taper, when it comes to the

532
00:31:28,440 --> 00:31:31,800
Speaker 1: rate hiking cycle. Where do you guys disagree most? I mean,

533
00:31:31,800 --> 00:31:34,280
Speaker 1: where do you see him wrong in his thinking in

534
00:31:34,400 --> 00:31:37,600
Speaker 1: terms of being patient at a time of rents going

535
00:31:37,680 --> 00:31:42,560
Speaker 1: up that quickly. Well, I actually reframe, uh what you

536
00:31:42,600 --> 00:31:46,200
Speaker 1: as slightly. I think the role of the chair is

537
00:31:46,280 --> 00:31:50,680
Speaker 1: to encourage a process of debate and disagreement. This is

538
00:31:50,720 --> 00:31:52,800
Speaker 1: why I thought it was so important to get asset

539
00:31:52,840 --> 00:31:56,120
Speaker 1: purchases on the table. But his job is to I

540
00:31:56,160 --> 00:31:59,400
Speaker 1: believe the chair's job is to encourage debate and disagreement,

541
00:32:00,280 --> 00:32:04,200
Speaker 1: try to forge a consensus and understand views in order

542
00:32:04,200 --> 00:32:06,800
Speaker 1: to come up with policy and have a good process.

543
00:32:07,040 --> 00:32:09,719
Speaker 1: And I think j Pal does a superb job at that.

544
00:32:10,720 --> 00:32:14,400
Speaker 1: Are you expecting him to make any kind of announcement

545
00:32:14,440 --> 00:32:18,880
Speaker 1: today in terms of paper timing? I would not go

546
00:32:19,120 --> 00:32:22,560
Speaker 1: near commenting on what j Pal is going to say

547
00:32:22,560 --> 00:32:24,440
Speaker 1: in his speech. I don't I don't think it'd be

548
00:32:24,480 --> 00:32:29,400
Speaker 1: appropriate to captain doesn't expect that from you? You know,

549
00:32:29,600 --> 00:32:34,520
Speaker 1: I had to try right anywhere near there? All right?

550
00:32:34,560 --> 00:32:38,560
Speaker 1: Would you? Would you expect that the Open Market Committee

551
00:32:38,600 --> 00:32:43,400
Speaker 1: on September two would announce the beginning of paper or

552
00:32:43,440 --> 00:32:46,320
Speaker 1: that it would come at the next couple of meetings.

553
00:32:46,760 --> 00:32:52,160
Speaker 1: So right now I'll speak to my own process, and

554
00:32:52,520 --> 00:32:56,480
Speaker 1: that may reflect on what others are doing. Um when

555
00:32:56,520 --> 00:33:00,480
Speaker 1: we've seen we've I've been talking pre research and I

556
00:33:00,520 --> 00:33:03,480
Speaker 1: thought we ought to be moving soon on asset purchases

557
00:33:03,920 --> 00:33:07,640
Speaker 1: and beginning that process. With the resurgence, we've gone back

558
00:33:07,680 --> 00:33:11,280
Speaker 1: at the Dallas fit and redoubled our efforts over the

559
00:33:11,360 --> 00:33:14,640
Speaker 1: last X number of weeks and intensively over the last

560
00:33:14,640 --> 00:33:18,160
Speaker 1: ten days, even to look at high frequency data, real

561
00:33:18,200 --> 00:33:23,280
Speaker 1: time surveys, stepping up, talking to contacts and what I'm

562
00:33:23,320 --> 00:33:26,800
Speaker 1: seeing and what I think we're gonna see up until

563
00:33:26,840 --> 00:33:30,560
Speaker 1: the meeting. But I'm gonna keep reconfirming this is resiliency.

564
00:33:30,720 --> 00:33:33,920
Speaker 1: That doesn't mean that you won't see some slowing and

565
00:33:34,040 --> 00:33:37,320
Speaker 1: say the August jobs numbers because the matching process will

566
00:33:37,320 --> 00:33:40,920
Speaker 1: slow because of fear of infection. It won't be because

567
00:33:40,920 --> 00:33:43,160
Speaker 1: a lack of demand for jobs. You might see a

568
00:33:43,160 --> 00:33:46,120
Speaker 1: little near term slowing in g d P, but I

569
00:33:46,160 --> 00:33:47,800
Speaker 1: don't think. I don't think what we're seeing is going

570
00:33:47,840 --> 00:33:51,240
Speaker 1: to change the outlook. And that's the process I'm going

571
00:33:51,280 --> 00:33:54,000
Speaker 1: through leading up to the meeting, and I would guess

572
00:33:54,040 --> 00:33:57,400
Speaker 1: others are doing the same process. Robert Caplen, thank you

573
00:33:57,440 --> 00:34:00,440
Speaker 1: so much, greatly, greatly appreciated this morning. With the Dallas

574
00:34:00,880 --> 00:34:09,080
Speaker 1: FED as well, we have spoken with the Harker of Philadelphia.

575
00:34:09,840 --> 00:34:12,440
Speaker 1: It is rather different in Dallas. And then there's the

576
00:34:12,600 --> 00:34:16,960
Speaker 1: absolute unique characteristics of St. Louis FED. If you think

577
00:34:17,000 --> 00:34:22,160
Speaker 1: of modern economic research, guess what St. Louis invented it

578
00:34:22,320 --> 00:34:26,399
Speaker 1: years ago. And they have Mike the chart service, they

579
00:34:26,400 --> 00:34:30,080
Speaker 1: have the facts service, they have the only one I

580
00:34:30,080 --> 00:34:32,879
Speaker 1: know that can actually use the thing. It's so wonderfully complicated,

581
00:34:33,120 --> 00:34:36,160
Speaker 1: is James Bullard. I was using Frasier the other day,

582
00:34:36,160 --> 00:34:40,719
Speaker 1: which comes from Minnesota, which I mean all this historical stuff. Uh.

583
00:34:40,920 --> 00:34:43,160
Speaker 1: Jim Bullard is the president of the Federal Reserve Bank

584
00:34:43,160 --> 00:34:45,719
Speaker 1: of St. Louis, And I guess, uh, we could ask

585
00:34:45,800 --> 00:34:48,640
Speaker 1: have you ever seen anything like this before in the economy,

586
00:34:48,640 --> 00:34:51,560
Speaker 1: but I kind of know the answer. This is a

587
00:34:51,680 --> 00:34:56,520
Speaker 1: unique experience. You were among the first to say that

588
00:34:56,600 --> 00:34:59,960
Speaker 1: the FED should start tapering, and I'm wondering if that's

589
00:35:00,080 --> 00:35:04,080
Speaker 1: because you are afraid of inflation hanging around and may

590
00:35:04,160 --> 00:35:09,799
Speaker 1: need to raise rates sooner than the markets anticipate. Yeah,

591
00:35:10,760 --> 00:35:14,080
Speaker 1: I think we do Fraser as well, uh in St. Louis.

592
00:35:14,120 --> 00:35:16,960
Speaker 1: So just to set the record straight on that one.

593
00:35:17,080 --> 00:35:23,359
Speaker 1: UM uh so yeah, I think, um. The key word

594
00:35:23,440 --> 00:35:28,640
Speaker 1: is optionality for we want to or I would like

595
00:35:28,719 --> 00:35:31,960
Speaker 1: to anyway taper now and and get it finished by

596
00:35:32,000 --> 00:35:34,719
Speaker 1: the end of the first quarter, and then at that

597
00:35:34,760 --> 00:35:40,000
Speaker 1: point I think we could assess what's happening in the

598
00:35:40,080 --> 00:35:43,279
Speaker 1: economy with respect to inflation. By that time, we'll have

599
00:35:43,760 --> 00:35:47,360
Speaker 1: many more jobs reports, and you know, it certainly looks

600
00:35:47,400 --> 00:35:53,200
Speaker 1: like they'll all be strong to varying degrees. Um. Unemployment

601
00:35:53,239 --> 00:35:56,800
Speaker 1: will tick down with a fore handle at that point,

602
00:35:57,000 --> 00:35:59,360
Speaker 1: and then we'll be able to see in the first

603
00:35:59,400 --> 00:36:05,240
Speaker 1: half of two if inflation is moderating or not. And

604
00:36:05,440 --> 00:36:08,279
Speaker 1: if it's moderating, then we're in great shape. And if

605
00:36:08,320 --> 00:36:11,399
Speaker 1: it's not moderating, uh, then we might have to be

606
00:36:11,760 --> 00:36:15,000
Speaker 1: more aggressive. So I think that optionality has a lot

607
00:36:15,040 --> 00:36:19,479
Speaker 1: of value right now. Um. I think the purchases don't

608
00:36:19,520 --> 00:36:22,719
Speaker 1: have much value right now. So um, it seems like

609
00:36:22,760 --> 00:36:26,399
Speaker 1: the tradeoff is just right to me. Let's phase out

610
00:36:26,440 --> 00:36:31,480
Speaker 1: the purchases and let's give ourselves some breathing room. In well,

611
00:36:31,520 --> 00:36:34,560
Speaker 1: as you look over the forecast horizon, do you think

612
00:36:34,600 --> 00:36:40,879
Speaker 1: that inflation sticks around? Yeah? I think, uh, right now

613
00:36:40,920 --> 00:36:43,520
Speaker 1: I'm sitting here today, I'd say two and a half

614
00:36:43,600 --> 00:36:50,439
Speaker 1: percent or higher in core PC inflation. Uh, so we're all,

615
00:36:50,719 --> 00:36:52,800
Speaker 1: you know, right now, we're at three and a half

616
00:36:52,880 --> 00:36:58,160
Speaker 1: on core PC inflation. That's the committees preferred smooth measure

617
00:36:59,080 --> 00:37:03,719
Speaker 1: of inflation, the one that's enshrined in the sep TO

618
00:37:03,880 --> 00:37:07,279
Speaker 1: Summary of Economic Projections. So it looks like we're going

619
00:37:07,320 --> 00:37:09,239
Speaker 1: to have quite a bit of inflation this year. That

620
00:37:09,320 --> 00:37:11,640
Speaker 1: three and a half percent number of measures from one

621
00:37:11,719 --> 00:37:15,320
Speaker 1: year ago is higher than it's been in thirty years,

622
00:37:16,360 --> 00:37:18,839
Speaker 1: and it is enough to bring the average inflation rate,

623
00:37:18,920 --> 00:37:22,279
Speaker 1: however you want to calculate it on that measure over

624
00:37:22,400 --> 00:37:25,760
Speaker 1: any five year period, either looking back or looking forward

625
00:37:25,880 --> 00:37:31,120
Speaker 1: up to two percent. So UM, then in the question

626
00:37:31,200 --> 00:37:34,880
Speaker 1: is how how fast is inflation going to moderate? UM.

627
00:37:34,920 --> 00:37:38,080
Speaker 1: If it moderates quickly, then then we're fine. But if

628
00:37:38,120 --> 00:37:41,359
Speaker 1: if it doesn't moderate, and I'm right and we're two

629
00:37:41,400 --> 00:37:44,000
Speaker 1: and a half percent or higher, then the Fed might

630
00:37:44,040 --> 00:37:46,360
Speaker 1: have to start to try to put downward pressure on

631
00:37:46,400 --> 00:37:48,720
Speaker 1: inflation in order to keep it at the right level.

632
00:37:49,280 --> 00:37:53,000
Speaker 1: Do you worry that interrupts the new framework? The idea

633
00:37:53,040 --> 00:37:56,600
Speaker 1: that you could have to raise rates because inflation is

634
00:37:56,680 --> 00:38:01,239
Speaker 1: higher than new anticipated, but you don't get the unemployment

635
00:38:01,320 --> 00:38:03,000
Speaker 1: rate down as far as you would like to, or

636
00:38:03,040 --> 00:38:06,080
Speaker 1: at least in terms of the diverse and inclusive unemployment rates.

637
00:38:07,200 --> 00:38:11,120
Speaker 1: Now we'd be hitting the new framework exactly. Uh. You know,

638
00:38:11,520 --> 00:38:16,360
Speaker 1: beautiful monetary policy under what I'm describing, because we would

639
00:38:16,480 --> 00:38:21,160
Speaker 1: have at that point had UH inflation above the two

640
00:38:21,200 --> 00:38:25,560
Speaker 1: percent targets for some time, and then inflation on a

641
00:38:25,600 --> 00:38:29,200
Speaker 1: core PC basis would be averaging two over some kind

642
00:38:29,239 --> 00:38:33,400
Speaker 1: of five year window either backward looking or or centered

643
00:38:34,480 --> 00:38:38,399
Speaker 1: and forward looking, and so you'd be you'd be hitting

644
00:38:38,400 --> 00:38:41,680
Speaker 1: it on that dimension. And then I think on the jobs,

645
00:38:41,840 --> 00:38:44,520
Speaker 1: you know, you've got to think about not exactly where

646
00:38:44,560 --> 00:38:46,640
Speaker 1: we are today, but where we're gonna be at the

647
00:38:46,760 --> 00:38:48,839
Speaker 1: end of the taper. The key thing here is when

648
00:38:48,920 --> 00:38:53,960
Speaker 1: is the taper going to end? And uh it certainly

649
00:38:54,000 --> 00:38:56,719
Speaker 1: looks like you're gonna have a very strong jobs from

650
00:38:56,760 --> 00:38:58,560
Speaker 1: market at that point. I mean, you can make the

651
00:38:58,680 --> 00:39:01,560
Speaker 1: argument today that this is one of the tightest job

652
00:39:01,640 --> 00:39:06,640
Speaker 1: markets we've seen, UH in in recent decades, because the

653
00:39:06,719 --> 00:39:10,560
Speaker 1: unemployment of vacancies ratio has gone down below one, so

654
00:39:10,719 --> 00:39:15,440
Speaker 1: more than one job opening for every unemployed worker. If

655
00:39:15,520 --> 00:39:18,040
Speaker 1: you want a broad measure of labor market performance, you

656
00:39:18,040 --> 00:39:21,520
Speaker 1: can look at the Kansas City FEDS Labor Market Conditions

657
00:39:21,560 --> 00:39:26,400
Speaker 1: Index that's moved up into positive territory and is headed

658
00:39:26,400 --> 00:39:31,879
Speaker 1: toward very high numbers, which will be again indicating one

659
00:39:31,920 --> 00:39:35,600
Speaker 1: of the strongest job markets that we've seen in recent decades.

660
00:39:35,680 --> 00:39:40,120
Speaker 1: So I think you know, all of that corroborates what

661
00:39:40,160 --> 00:39:43,840
Speaker 1: you're hearing on this show and everywhere across the economy

662
00:39:43,920 --> 00:39:47,760
Speaker 1: about jobs, which is that firms are having a really

663
00:39:47,800 --> 00:39:53,680
Speaker 1: tough time hiring. They're offering wage increases, are offering bonuses,

664
00:39:53,719 --> 00:39:58,319
Speaker 1: are offering retention signing bonuses, retention bonuses. Uh, they have

665
00:39:58,440 --> 00:40:02,280
Speaker 1: job affairs where going shows up. So lots of things,

666
00:40:02,640 --> 00:40:05,000
Speaker 1: uh seem to be pointing to a very strong jobs

667
00:40:05,040 --> 00:40:08,080
Speaker 1: market right now. And if you're gonna have six percent

668
00:40:08,160 --> 00:40:10,799
Speaker 1: growth in the US economy over the second half this

669
00:40:10,880 --> 00:40:14,120
Speaker 1: year and four percent growth next year, that's just going

670
00:40:14,160 --> 00:40:16,719
Speaker 1: to improve all that much more. So I think we'll

671
00:40:16,760 --> 00:40:19,520
Speaker 1: be in great shape in uh in the first half

672
00:40:19,520 --> 00:40:23,799
Speaker 1: of two, but we have to have some optionality there

673
00:40:23,800 --> 00:40:27,440
Speaker 1: in case inflation doesn't moderate. Well, what are companies telling

674
00:40:27,480 --> 00:40:29,719
Speaker 1: you about what they're having to pay and how long

675
00:40:29,760 --> 00:40:31,239
Speaker 1: they think they're gonna have to pay it, both for

676
00:40:31,680 --> 00:40:34,759
Speaker 1: input goods and for labor. Is this going to be

677
00:40:35,200 --> 00:40:38,279
Speaker 1: something that at this point they're anticipating a bit of

678
00:40:38,280 --> 00:40:42,279
Speaker 1: a cycle. Well, one of my top concerns, and I've

679
00:40:42,280 --> 00:40:45,879
Speaker 1: heard it on listening to you guys, is CEOs will

680
00:40:45,880 --> 00:40:50,440
Speaker 1: come in and they'll say, yeah, my input costs are

681
00:40:50,520 --> 00:40:52,880
Speaker 1: way up, but we don't think this is a problem.

682
00:40:52,920 --> 00:40:58,040
Speaker 1: We're gonna pass that right on in raise prices and uh,

683
00:40:58,120 --> 00:40:59,880
Speaker 1: you know, my labor costs are up, but we're going

684
00:40:59,920 --> 00:41:03,000
Speaker 1: to pass that on into prices. That sounds like a

685
00:41:03,360 --> 00:41:07,600
Speaker 1: worrisome dynamic to me, and one that you know. We

686
00:41:07,680 --> 00:41:12,040
Speaker 1: certainly want real wages to go up, but for everyone.

687
00:41:12,520 --> 00:41:15,760
Speaker 1: I want those to be as high as possible. But um,

688
00:41:16,200 --> 00:41:18,600
Speaker 1: we don't want to get into a cycle where that

689
00:41:18,680 --> 00:41:22,480
Speaker 1: just feeds through to the inflation process in the economy.

690
00:41:22,600 --> 00:41:25,000
Speaker 1: Jim Bowler toom Keenan good morning to your thrilled to

691
00:41:25,040 --> 00:41:28,160
Speaker 1: speak to you before Chairman Pal Jim Boward, I want

692
00:41:28,160 --> 00:41:30,480
Speaker 1: to go back five years to two big things of

693
00:41:30,560 --> 00:41:33,600
Speaker 1: two thousand and sixteen. One of them was Marvin good

694
00:41:33,640 --> 00:41:36,759
Speaker 1: Friend in the uproar over his paper at Jackson all

695
00:41:37,080 --> 00:41:39,920
Speaker 1: the late Marvin good Friend folks of Carnegie Mellon on

696
00:41:40,120 --> 00:41:43,200
Speaker 1: zero interest in the negative rates. Well, guess what, Jim

697
00:41:43,239 --> 00:41:46,560
Speaker 1: Bollard good Friend was right. Negative rates up, up, up,

698
00:41:46,680 --> 00:41:49,880
Speaker 1: up worldwide as well. And also you may recall in

699
00:41:49,960 --> 00:41:53,920
Speaker 1: two thousand and sixteen somebody in St. Louis said, forget

700
00:41:53,960 --> 00:41:57,080
Speaker 1: about a single point outcome. We are going to have

701
00:41:57,200 --> 00:42:02,720
Speaker 1: the different states of a regime chain dovetail what happened

702
00:42:02,760 --> 00:42:06,640
Speaker 1: five years ago and take us out ten years. Can

703
00:42:06,719 --> 00:42:11,680
Speaker 1: we get to a constructive different state given them huge

704
00:42:11,920 --> 00:42:19,680
Speaker 1: negative interest rates worldwide. Yeah, I think uh after Professor

705
00:42:19,760 --> 00:42:23,439
Speaker 1: good Friends paper h. Central banks around the world did

706
00:42:23,480 --> 00:42:27,439
Speaker 1: experiment with negative rates, I think with very mixed success,

707
00:42:28,239 --> 00:42:30,640
Speaker 1: and I think that's why we've tried to avoid that

708
00:42:30,800 --> 00:42:35,160
Speaker 1: outcome in the US. UM With respect to the regime,

709
00:42:35,280 --> 00:42:38,840
Speaker 1: I mean I did switch in sixteen to saying that

710
00:42:39,320 --> 00:42:41,600
Speaker 1: I thought we were just in a low inflation low

711
00:42:42,200 --> 00:42:46,120
Speaker 1: now anal interest rate low real interest rate environment, uh,

712
00:42:46,239 --> 00:42:51,480
Speaker 1: slow growth, and that that wasn't gonna change very readily,

713
00:42:51,800 --> 00:42:54,759
Speaker 1: and that meant that monetary policy didn't have to be

714
00:42:54,800 --> 00:42:57,840
Speaker 1: as aggressive as we had previously been. So I was

715
00:42:57,920 --> 00:43:00,120
Speaker 1: kind of on the Davers side at that point. But

716
00:43:00,239 --> 00:43:06,319
Speaker 1: now we're coming through this pandemic um and policy has

717
00:43:06,360 --> 00:43:10,640
Speaker 1: been a human tragedy of course, of unimaginable dimensions, but

718
00:43:11,200 --> 00:43:13,560
Speaker 1: from the economy's point of view, have played it very

719
00:43:13,600 --> 00:43:16,160
Speaker 1: well as a nation with the fiscal policy and the

720
00:43:16,200 --> 00:43:19,120
Speaker 1: monetary policy. And now we're coming out of the pandemic

721
00:43:19,160 --> 00:43:22,959
Speaker 1: with a very strong economy, and I think it's very

722
00:43:23,120 --> 00:43:27,800
Speaker 1: possible that we're switching into a high productivity growth regime

723
00:43:28,320 --> 00:43:31,960
Speaker 1: and that means somewhat higher interest rates than you'd otherwise

724
00:43:32,400 --> 00:43:36,959
Speaker 1: have seen. It means faster growth than you otherwise would

725
00:43:36,960 --> 00:43:41,880
Speaker 1: have seen, and I'm hopeful that all of that occurs.

726
00:43:41,920 --> 00:43:46,759
Speaker 1: The last time we had a faster growth, higher productivity

727
00:43:46,760 --> 00:43:50,240
Speaker 1: growth economy was the late ninety nineties where we boomed

728
00:43:50,280 --> 00:43:52,920
Speaker 1: for four years and started talking about paying off the

729
00:43:53,040 --> 00:43:56,400
Speaker 1: entire national debt. Well, and Jim, you're talking about nap

730
00:43:57,040 --> 00:44:01,399
Speaker 1: that didn't happen. But Jim, you're talking about negative interest

731
00:44:01,480 --> 00:44:03,759
Speaker 1: rates and how that's been problematic in certain ways, and

732
00:44:03,800 --> 00:44:06,200
Speaker 1: certainly in the United States it wouldn't be as as

733
00:44:06,320 --> 00:44:08,799
Speaker 1: smooth as it has been other places, for the money

734
00:44:08,840 --> 00:44:11,520
Speaker 1: market fund and a variety of other reasons. But you've

735
00:44:11,560 --> 00:44:14,120
Speaker 1: talked about the need to get interest rates up so

736
00:44:14,160 --> 00:44:17,400
Speaker 1: that we can use that in combat the next downturn,

737
00:44:17,520 --> 00:44:21,600
Speaker 1: have some ammunition. If we cannot get rates substantially higher,

738
00:44:21,680 --> 00:44:25,360
Speaker 1: how important How do you foresee us IT purchases factoring

739
00:44:25,440 --> 00:44:31,200
Speaker 1: into future stimulus. Yeah. They've become a standard part of

740
00:44:31,200 --> 00:44:35,400
Speaker 1: the toolkit, and we used it after the global financial crisis,

741
00:44:35,520 --> 00:44:40,799
Speaker 1: pioneered by uh former chairman Bernanke and kudos to him

742
00:44:40,880 --> 00:44:44,280
Speaker 1: for that. And then uh, you know, when this crisis

743
00:44:44,320 --> 00:44:48,040
Speaker 1: came along, we went right back to it with considerable success,

744
00:44:48,080 --> 00:44:52,640
Speaker 1: I would say, in the March April period where we

745
00:44:52,719 --> 00:44:58,640
Speaker 1: really were staring at possible depression and a possible financial crisis,

746
00:44:58,680 --> 00:45:02,959
Speaker 1: and I thought Chaire Powell did a excellent job during

747
00:45:03,000 --> 00:45:05,920
Speaker 1: that time frame in getting us into a policy that

748
00:45:05,960 --> 00:45:09,160
Speaker 1: avoided the financial crisis that could have occurred on top

749
00:45:09,920 --> 00:45:15,920
Speaker 1: of the pandemic and put us on very good footing.

750
00:45:16,080 --> 00:45:20,880
Speaker 1: It wasn't too long after UH March April that financial

751
00:45:20,880 --> 00:45:24,880
Speaker 1: stress measures came way down from from very high levels

752
00:45:25,000 --> 00:45:28,919
Speaker 1: and we got back to UH normality, at least with

753
00:45:28,960 --> 00:45:33,919
Speaker 1: respect to financial markets. So UM, asset purchases are part

754
00:45:33,920 --> 00:45:36,520
Speaker 1: of the toolkit and they're here to stay. But right now,

755
00:45:36,760 --> 00:45:39,200
Speaker 1: I don't think they're helping us that much, and they

756
00:45:39,239 --> 00:45:44,800
Speaker 1: may be causing harm, especially in housing, where we don't

757
00:45:44,840 --> 00:45:49,400
Speaker 1: want to feed into an incipient UH housing bubble. We

758
00:45:49,480 --> 00:45:51,439
Speaker 1: got into a lot of trouble in the mid two

759
00:45:51,440 --> 00:45:55,399
Speaker 1: thousands with housing, and I'm not too anxious to try

760
00:45:55,440 --> 00:45:59,160
Speaker 1: to UH to see that happen again. So UM, I

761
00:45:59,200 --> 00:46:03,279
Speaker 1: think that just time has come to end these purchases

762
00:46:03,520 --> 00:46:07,959
Speaker 1: and get the Committee and the nation some optionality for

763
00:46:08,080 --> 00:46:11,279
Speaker 1: what we may have to do in two But we're not.

764
00:46:12,239 --> 00:46:15,600
Speaker 1: We're certainly going to keep sharp control over our our

765
00:46:15,640 --> 00:46:18,440
Speaker 1: interest rate decisions. We're not gonna be on any kind

766
00:46:18,440 --> 00:46:21,600
Speaker 1: of mechanical path, but we're going to want to assess

767
00:46:21,760 --> 00:46:25,479
Speaker 1: where we are in the spring of two to see

768
00:46:25,520 --> 00:46:28,239
Speaker 1: what the what course we want to chart U to

769
00:46:28,360 --> 00:46:33,440
Speaker 1: keep inflation under control. Uh. From that point forward to

770
00:46:33,760 --> 00:46:35,880
Speaker 1: let me ask you one last question, and that's about

771
00:46:36,000 --> 00:46:38,840
Speaker 1: how you think the Wall Street folks are going to

772
00:46:38,880 --> 00:46:42,200
Speaker 1: react to this. Uh. There's been a feeling that you

773
00:46:42,280 --> 00:46:45,040
Speaker 1: guys are propping up the big gains that we've seen

774
00:46:45,040 --> 00:46:48,680
Speaker 1: in the indexes, and the fact that the bond market

775
00:46:48,719 --> 00:46:53,279
Speaker 1: has kept rates so low indicates they believe that we're

776
00:46:53,280 --> 00:46:55,200
Speaker 1: not going to have an inflation problem. If if you

777
00:46:55,200 --> 00:46:57,839
Speaker 1: send a message that maybe we will and it's time

778
00:46:57,880 --> 00:47:02,520
Speaker 1: to stop giving you guys support, we're gonna have a problem.

779
00:47:02,880 --> 00:47:05,560
Speaker 1: I don't think so. I mean you you talked to

780
00:47:05,640 --> 00:47:08,880
Speaker 1: pretty much everybody in the markets, and my sense is

781
00:47:08,920 --> 00:47:12,359
Speaker 1: that you know, at some level the tapering process has

782
00:47:12,440 --> 00:47:16,160
Speaker 1: already been priced in. Maybe not that all the details

783
00:47:16,200 --> 00:47:21,359
Speaker 1: around it or exactly h exactly how long fold and

784
00:47:21,400 --> 00:47:24,840
Speaker 1: so there's a little bit more there, But certainly seems

785
00:47:24,920 --> 00:47:29,640
Speaker 1: like commentators and traders are well aware that UH there

786
00:47:29,640 --> 00:47:33,560
Speaker 1: will be a tapering process, and and that it makes

787
00:47:33,600 --> 00:47:38,120
Speaker 1: sense at this point given how well the economy has done.

788
00:47:38,160 --> 00:47:41,279
Speaker 1: This economy is producing more national income than the one

789
00:47:41,760 --> 00:47:46,400
Speaker 1: that existed before the pandemic. The pre pandemic economy didn't

790
00:47:46,400 --> 00:47:50,160
Speaker 1: have zero interest rates, by the way, UH, So I

791
00:47:50,200 --> 00:47:56,040
Speaker 1: think UM, I think markets would UH react, you know,

792
00:47:56,120 --> 00:47:58,800
Speaker 1: in some broad sense, they'd react well to this because

793
00:47:58,800 --> 00:48:02,160
Speaker 1: it would mean that the Fed is going to stay

794
00:48:02,239 --> 00:48:05,600
Speaker 1: in good position to handle all the possibilities that might

795
00:48:05,640 --> 00:48:09,279
Speaker 1: come if inflation all rates in two and a great

796
00:48:09,320 --> 00:48:12,040
Speaker 1: position for that, and if we get the tabor out

797
00:48:12,040 --> 00:48:14,560
Speaker 1: of the way, UH, then we'll also be a good

798
00:48:14,560 --> 00:48:18,080
Speaker 1: position if we have to tamp down a little bit

799
00:48:18,120 --> 00:48:20,840
Speaker 1: on inflation pressure in the economy. Dr Bullard, thank you

800
00:48:20,880 --> 00:48:24,280
Speaker 1: so much for joining us today from St. Louis. Jim Bullard.

801
00:48:30,280 --> 00:48:33,160
Speaker 1: Right now, get to Gopinath with us with the International

802
00:48:33,200 --> 00:48:36,720
Speaker 1: Monetary Fund and their chief economists. Their director of research

803
00:48:36,800 --> 00:48:41,399
Speaker 1: Maurice Hobsfeld, will be on the UH podium later at

804
00:48:41,480 --> 00:48:44,640
Speaker 1: Jackson Old today someone else who has held that position

805
00:48:44,760 --> 00:48:46,800
Speaker 1: over the years. Gita, thank you so much for joining

806
00:48:46,920 --> 00:48:49,880
Speaker 1: us UH this morning. Before we get to the affairs

807
00:48:49,880 --> 00:48:54,360
Speaker 1: of Jackson Hole, Gita, I am required to address a

808
00:48:54,440 --> 00:48:58,640
Speaker 1: bit outside your remit at the International Monetary Fund and

809
00:48:58,680 --> 00:49:00,960
Speaker 1: that is what all are why ching, which is how

810
00:49:01,000 --> 00:49:04,840
Speaker 1: the i m F will adapt and adjust to Afghanistan

811
00:49:05,280 --> 00:49:09,520
Speaker 1: and the Taliban. This has to do with special drawing rights.

812
00:49:09,960 --> 00:49:14,000
Speaker 1: Explain to our audience the choice set that the Managing

813
00:49:14,040 --> 00:49:16,200
Speaker 1: Director and all of you at the i m F

814
00:49:16,400 --> 00:49:22,239
Speaker 1: have with these unusual events in Afghanistan. HI tell them

815
00:49:22,239 --> 00:49:25,440
Speaker 1: it's a pleasure to join your show. Now a SDRs

816
00:49:25,560 --> 00:49:29,840
Speaker 1: are allocated to all the member countries. Now, which countries

817
00:49:29,880 --> 00:49:34,800
Speaker 1: can actually use the SDRs depends upon whether the government

818
00:49:34,840 --> 00:49:39,000
Speaker 1: in that country is being recognized by the membership off

819
00:49:39,480 --> 00:49:41,960
Speaker 1: the i m F. And at this point, with the

820
00:49:41,960 --> 00:49:47,239
Speaker 1: recent developments that we've seen, which is a heartbreaking, there

821
00:49:47,440 --> 00:49:50,560
Speaker 1: is no recognition. So at this point, uh, you know,

822
00:49:50,600 --> 00:49:54,920
Speaker 1: the SDRs will not be available to be used by Afghanistan.

823
00:49:55,440 --> 00:49:57,279
Speaker 1: If we can look at your panel today with a

824
00:49:57,360 --> 00:50:00,880
Speaker 1: former Vice Channel and Alan Blinder also were leaper of

825
00:50:00,960 --> 00:50:04,040
Speaker 1: Virginia as well, it is to me the most interesting

826
00:50:04,080 --> 00:50:06,880
Speaker 1: event at Jackson Hall. And I'm gonna be honest Kit too,

827
00:50:07,000 --> 00:50:09,879
Speaker 1: It's more interesting than what the Chairman's gonna say, we

828
00:50:09,960 --> 00:50:13,040
Speaker 1: live in a time where we've never seen linkages of

829
00:50:13,160 --> 00:50:18,440
Speaker 1: fiscal and monetary policy. It's literally, we're doing MMT within

830
00:50:18,520 --> 00:50:23,480
Speaker 1: your panel, Will you people discuss modern monetary theory? Are

831
00:50:23,520 --> 00:50:29,279
Speaker 1: we doing MMT in two thousand twenty two? So I'm

832
00:50:29,320 --> 00:50:33,080
Speaker 1: now I don't believe we are doing MMT. Oh, you know,

833
00:50:33,280 --> 00:50:37,400
Speaker 1: it's a decade before the COVID crisis was one where

834
00:50:37,440 --> 00:50:40,759
Speaker 1: everybody was complaining that monitored policy cannot be the only

835
00:50:40,800 --> 00:50:44,360
Speaker 1: game in town, and that was appropriate. And then COVID

836
00:50:44,400 --> 00:50:48,040
Speaker 1: struck and fiscal policy came to town in a big way.

837
00:50:48,080 --> 00:50:51,160
Speaker 1: So we've seen interaction of the kind that we've never

838
00:50:51,280 --> 00:50:55,560
Speaker 1: seen before. But it was necessary. It was needed for

839
00:50:55,600 --> 00:50:58,680
Speaker 1: the kind of challenge the world economy was facing, and

840
00:50:58,719 --> 00:51:01,359
Speaker 1: it helped to prevent a much deeper recession. I mean,

841
00:51:01,400 --> 00:51:04,360
Speaker 1: our estimates that the recession would have been three times

842
00:51:04,800 --> 00:51:08,480
Speaker 1: worse last year had it not been for both fiscal

843
00:51:08,480 --> 00:51:11,680
Speaker 1: and monitary policy support. Now that said, would be very

844
00:51:11,680 --> 00:51:16,760
Speaker 1: clear why this is good policy, because ultimately decision making,

845
00:51:16,840 --> 00:51:19,680
Speaker 1: central bank decision making has to be controlled by central

846
00:51:19,680 --> 00:51:23,719
Speaker 1: bank priority, central bank goals uh and so central like

847
00:51:23,800 --> 00:51:28,440
Speaker 1: independence has served countries very well, and it makes sense

848
00:51:28,480 --> 00:51:31,920
Speaker 1: to do quantitative easing and asset purchases as long as

849
00:51:31,920 --> 00:51:35,800
Speaker 1: you're doing this independently. This is not about being pressured

850
00:51:35,840 --> 00:51:39,040
Speaker 1: by governments to the monetary financing. You're meeting your goals,

851
00:51:39,320 --> 00:51:42,719
Speaker 1: You're keeping inflation expectations anchored, and that's what the difference is.

852
00:51:43,040 --> 00:51:45,239
Speaker 1: Get this is such a delicate dance. How do you

853
00:51:45,280 --> 00:51:48,839
Speaker 1: avoid politicizing at the central banking community at a time

854
00:51:49,080 --> 00:51:52,880
Speaker 1: when low interest rates that they're helping continue really is

855
00:51:52,920 --> 00:51:55,400
Speaker 1: what is allowing some of the fiscal impulse that we

856
00:51:55,480 --> 00:51:59,320
Speaker 1: see in Washington, d C. How fraught does this become,

857
00:51:59,680 --> 00:52:02,520
Speaker 1: as with inequality as a focus for the Federal reserve

858
00:52:02,719 --> 00:52:05,239
Speaker 1: for central banks at a time when that really is

859
00:52:05,320 --> 00:52:10,640
Speaker 1: the purview of fiscal policy and not monetary policy. There

860
00:52:10,719 --> 00:52:14,759
Speaker 1: are some things indeed that fiscal policy is just much

861
00:52:14,800 --> 00:52:17,800
Speaker 1: a better place to address. And again issues of inequality

862
00:52:18,239 --> 00:52:21,759
Speaker 1: is a great example of that. Now, what we when

863
00:52:21,760 --> 00:52:24,919
Speaker 1: we look at which countries are able to do large

864
00:52:24,960 --> 00:52:28,799
Speaker 1: scale asset purchases, it is countries that have built up

865
00:52:29,440 --> 00:52:34,040
Speaker 1: very credible central banks, very transparent central banks, with good

866
00:52:34,239 --> 00:52:37,200
Speaker 1: rules based policy making. So we have to keep that

867
00:52:37,280 --> 00:52:40,120
Speaker 1: in mind. I mean, the exception doesn't make the rule.

868
00:52:40,440 --> 00:52:43,919
Speaker 1: You have to maintain your reputation for keeping your eye

869
00:52:43,960 --> 00:52:47,080
Speaker 1: on inflation and inflation expectations, and if you do that

870
00:52:47,200 --> 00:52:49,520
Speaker 1: in good times, and then when you have hit by

871
00:52:49,560 --> 00:52:52,680
Speaker 1: a crisis, you can do exceptional measures. So you know,

872
00:52:52,760 --> 00:52:55,120
Speaker 1: we are living in times of low interest rates, and

873
00:52:55,160 --> 00:52:58,360
Speaker 1: I suspect that will be the case going forward for

874
00:52:58,400 --> 00:53:01,400
Speaker 1: many years. So this is a challenge that both fiscal

875
00:53:01,480 --> 00:53:03,560
Speaker 1: and monetary policy has to deal with. And I would

876
00:53:03,560 --> 00:53:06,200
Speaker 1: bring in there what's happening in financial markets because what

877
00:53:06,360 --> 00:53:10,359
Speaker 1: we are seeing, of course is very high valuations and

878
00:53:10,400 --> 00:53:14,160
Speaker 1: frankly complacency in financial markets. So there's very little room

879
00:53:14,280 --> 00:53:17,359
Speaker 1: for surprises at this time. And this is exactly going

880
00:53:17,400 --> 00:53:19,560
Speaker 1: to be the challenge which is what we will see

881
00:53:19,560 --> 00:53:22,239
Speaker 1: in Jackson all which is how do you communicate you're

882
00:53:22,320 --> 00:53:24,360
Speaker 1: very clear of it when you're going to move without

883
00:53:24,480 --> 00:53:27,920
Speaker 1: creating tantrums GA. There's also the flip side of this

884
00:53:28,280 --> 00:53:32,080
Speaker 1: that easy monetary conditions can plug a hole and actually

885
00:53:32,080 --> 00:53:35,160
Speaker 1: take the pressure off fiscal policymakers from actually putting through

886
00:53:35,200 --> 00:53:38,239
Speaker 1: some of the policies necessary to bridge some of the

887
00:53:38,360 --> 00:53:42,280
Speaker 1: issues in society that FED policy is increasingly becoming aware

888
00:53:42,280 --> 00:53:44,680
Speaker 1: of how do you sort of view that the idea

889
00:53:44,760 --> 00:53:48,440
Speaker 1: that when the Fed creates this calm, creates the stasis

890
00:53:48,440 --> 00:53:51,239
Speaker 1: in markets, it can make people, at least in Washington,

891
00:53:51,320 --> 00:53:54,520
Speaker 1: d C. Feel like there isn't as much of a problem.

892
00:53:54,560 --> 00:53:57,839
Speaker 1: I mean that exactly was the problem before this crisis, right,

893
00:53:57,880 --> 00:54:00,600
Speaker 1: I mean everything was left to monitory polity and fiscal

894
00:54:00,600 --> 00:54:03,480
Speaker 1: policy wasn't doing anything. This time around, at least in

895
00:54:03,520 --> 00:54:06,920
Speaker 1: the advanced economies, we have seen the recognition that montreal

896
00:54:06,960 --> 00:54:10,800
Speaker 1: policy cannot do it all. And uh, you know that

897
00:54:11,040 --> 00:54:13,000
Speaker 1: the one of the messages I will make is to

898
00:54:13,080 --> 00:54:15,680
Speaker 1: make sure this continues and this is not a one off,

899
00:54:17,000 --> 00:54:19,840
Speaker 1: you know, intervention that happened with fiscal policy, That this

900
00:54:20,200 --> 00:54:23,440
Speaker 1: is durable and this continues because one of policy cannot

901
00:54:23,600 --> 00:54:27,600
Speaker 1: solve kinds of problems. You're talking about the one final question.

902
00:54:27,640 --> 00:54:30,360
Speaker 1: I'm gonna get you in trouble here. My my apologies

903
00:54:30,520 --> 00:54:33,840
Speaker 1: up front as well. We have had a wonderful set

904
00:54:33,920 --> 00:54:37,319
Speaker 1: of Federal Reserve chairman's, including a guy named Bernanky, who

905
00:54:37,320 --> 00:54:40,520
Speaker 1: I think you have a nodding acquaintance with. We've got

906
00:54:40,560 --> 00:54:45,799
Speaker 1: clarative Columbia holding Ford on monetary theory, and others. Talk

907
00:54:45,920 --> 00:54:50,000
Speaker 1: to me about the reappointment of a non PhD economists

908
00:54:50,200 --> 00:54:53,120
Speaker 1: Chairman of the Fed. Do you care that your own

909
00:54:53,200 --> 00:54:59,839
Speaker 1: Powell isn't a PhD economist? I didn't share. Powell has

910
00:54:59,840 --> 00:55:04,480
Speaker 1: been in doing a great job in very difficult times,

911
00:55:05,120 --> 00:55:07,480
Speaker 1: and no, I don't care whether he has a PhD

912
00:55:07,640 --> 00:55:11,759
Speaker 1: or not. I think it's important to get the right

913
00:55:12,080 --> 00:55:15,520
Speaker 1: inputs from all kinds of people, with all kinds of backgrounds,

914
00:55:15,719 --> 00:55:18,279
Speaker 1: and and he's been very clear about that, and he's

915
00:55:19,200 --> 00:55:21,600
Speaker 1: been reacting very well to the kinds of advice he's

916
00:55:21,600 --> 00:55:24,400
Speaker 1: been getting. To Dr Copeneff, thank you so much for

917
00:55:24,480 --> 00:55:27,120
Speaker 1: joining us today. Get to go open at the International

918
00:55:27,640 --> 00:55:36,719
Speaker 1: Monetary Fund right now. Lisa Brandma's Taylor Rigs and I

919
00:55:36,760 --> 00:55:40,680
Speaker 1: are honored to present to you Mark Kimmitt, Brigadier General,

920
00:55:40,800 --> 00:55:44,279
Speaker 1: retired Brigadier General, former Assistant Secretary of State for the

921
00:55:44,320 --> 00:55:47,600
Speaker 1: Bush Administration. General Kimmit, thank you so much. You came

922
00:55:47,600 --> 00:55:50,120
Speaker 1: out of West Point and you had to wander up

923
00:55:50,120 --> 00:55:53,640
Speaker 1: to Camp Stanley and Korea, which wasn't a Hollywood TV

924
00:55:53,800 --> 00:55:57,000
Speaker 1: set of mash but it was the real deal back

925
00:55:57,040 --> 00:56:01,600
Speaker 1: in nineteen fifty four with real day. We face real

926
00:56:01,719 --> 00:56:04,839
Speaker 1: danger today in cobble. How do we in adapt an

927
00:56:04,840 --> 00:56:10,120
Speaker 1: adjust on this Friday afternoon in Afghanistan. Well, I think

928
00:56:10,120 --> 00:56:12,880
Speaker 1: the two issues, one of the near term issues and

929
00:56:12,960 --> 00:56:15,560
Speaker 1: the long term issues. The near term issue, we tighten

930
00:56:15,640 --> 00:56:19,399
Speaker 1: up the security, We push out the perimeter UH so

931
00:56:19,480 --> 00:56:23,919
Speaker 1: that the screening is done further out by fewer people UH,

932
00:56:23,960 --> 00:56:28,239
Speaker 1: and candidly we quit UH asking permission of the Taliban

933
00:56:28,320 --> 00:56:31,359
Speaker 1: to protect our troops. In the long term, we've got

934
00:56:31,360 --> 00:56:35,880
Speaker 1: to understand the implications of the Cobble bombing and understand

935
00:56:35,920 --> 00:56:40,759
Speaker 1: that that's a recruiting poster for every terrorist outfit in

936
00:56:40,840 --> 00:56:43,560
Speaker 1: the world. And we better start getting ready to adapt

937
00:56:44,480 --> 00:56:47,719
Speaker 1: to this new pre nine eleven period that we're going

938
00:56:47,760 --> 00:56:51,000
Speaker 1: to be going through. Lisa and Taylor have some important questions.

939
00:56:51,040 --> 00:56:53,960
Speaker 1: I have to ask a difficult question which alludes to

940
00:56:54,080 --> 00:56:58,560
Speaker 1: section sixty at Arlington Cemetery. How do we defend people

941
00:56:58,640 --> 00:57:03,959
Speaker 1: like you against suicide attack? Well, the most important issue

942
00:57:04,000 --> 00:57:06,920
Speaker 1: is how do we defend America against suicide attacks? And

943
00:57:06,960 --> 00:57:10,759
Speaker 1: that is continue the policies that we've had, which is

944
00:57:11,000 --> 00:57:16,160
Speaker 1: unflinching offensive operations, fight them forward, don't wait for them

945
00:57:16,160 --> 00:57:21,920
Speaker 1: to come to us, general commit going forward. How concerned

946
00:57:21,960 --> 00:57:25,400
Speaker 1: are you about the strategic importance of Afghanistan and the

947
00:57:25,560 --> 00:57:28,800
Speaker 1: US not having a footprint there at a time of

948
00:57:28,880 --> 00:57:32,440
Speaker 1: increasing chaos. Yeah, I don't think we have a strategic

949
00:57:32,560 --> 00:57:36,560
Speaker 1: interest in Afghanistan except to prevent it from becoming yet

950
00:57:36,560 --> 00:57:40,360
Speaker 1: again another safe haven and sanctuary for terrorism as it

951
00:57:40,440 --> 00:57:44,840
Speaker 1: had been pre nine eleven. We're already seeing indications that

952
00:57:44,960 --> 00:57:48,840
Speaker 1: it is that everybody's now coming back to this ungoverned

953
00:57:48,920 --> 00:57:52,240
Speaker 1: space and they're suiting up. For lack of a better term,

954
00:57:52,440 --> 00:57:55,240
Speaker 1: we need to not have the pre nine eleven view

955
00:57:55,280 --> 00:57:58,000
Speaker 1: of just keeping an eye on things there. But as

956
00:57:58,040 --> 00:58:01,320
Speaker 1: we see these terrorist training camp and we see these

957
00:58:01,640 --> 00:58:05,440
Speaker 1: activities and hear these activities being planned, we've got to

958
00:58:05,480 --> 00:58:10,000
Speaker 1: take action against these camps through air strikes and candidly,

959
00:58:10,120 --> 00:58:12,080
Speaker 1: sometimes we're gonna have to put our people on the

960
00:58:12,160 --> 00:58:14,880
Speaker 1: ground to make sure that these people never have a

961
00:58:14,960 --> 00:58:18,080
Speaker 1: chance to achieve a critical mass to attack us again,

962
00:58:18,440 --> 00:58:20,840
Speaker 1: because they look at what's happening at Kabbal and they

963
00:58:20,840 --> 00:58:23,720
Speaker 1: say it's time to go after the Americans again. We've

964
00:58:23,720 --> 00:58:27,360
Speaker 1: shown weakness and we can't show weakness going forward. In general.

965
00:58:27,440 --> 00:58:29,320
Speaker 1: Is their political capital to do that At a time

966
00:58:29,600 --> 00:58:32,400
Speaker 1: when most people in the United States were for withdrawing

967
00:58:32,400 --> 00:58:34,720
Speaker 1: the troops and when frankly, the allies of the United

968
00:58:34,720 --> 00:58:38,080
Speaker 1: States perhaps don't trust the commitment to go in and

969
00:58:38,120 --> 00:58:41,840
Speaker 1: to have their backs. Well, first of all, I don't

970
00:58:41,840 --> 00:58:44,560
Speaker 1: want to talk about political capital. The fact remains most

971
00:58:44,600 --> 00:58:49,160
Speaker 1: Americans agreed with the withdrawal, but they have not agreed

972
00:58:49,200 --> 00:58:51,800
Speaker 1: with this debacle that we're seeing over the last couple

973
00:58:51,840 --> 00:58:54,600
Speaker 1: of weeks. Uh, those of us that have watched this

974
00:58:54,640 --> 00:58:57,600
Speaker 1: for a long time had policy positions focused on this.

975
00:58:58,360 --> 00:59:00,400
Speaker 1: I believe that we should have done us at a

976
00:59:00,440 --> 00:59:04,440
Speaker 1: longer pace, during the winter, not the fighting season, and

977
00:59:04,480 --> 00:59:07,120
Speaker 1: we should have left the commitment on the ground to

978
00:59:07,200 --> 00:59:10,440
Speaker 1: continue to put some backbone into the Afghan army. The

979
00:59:10,560 --> 00:59:14,040
Speaker 1: sloppy way we did it, this shambolic way we did it,

980
00:59:14,080 --> 00:59:18,200
Speaker 1: I think is directly demonstrated by what happened yesterday and

981
00:59:18,280 --> 00:59:20,520
Speaker 1: as of yesterday, I mean, what do you think of

982
00:59:20,600 --> 00:59:27,120
Speaker 1: we're asking terrorists to support us in fighting the other terrorists?

983
00:59:27,120 --> 00:59:30,680
Speaker 1: In general? Mackenzie yesterday said the Taliban was our front

984
00:59:30,760 --> 00:59:34,720
Speaker 1: line of security. Somehow that suicide bomber got through to

985
00:59:34,840 --> 00:59:38,920
Speaker 1: the US forces as that second line of security. Unfortunately,

986
00:59:38,960 --> 00:59:41,400
Speaker 1: the suicide been went off and thank god it didn't

987
00:59:41,440 --> 00:59:44,800
Speaker 1: get on the airplane. Are we trusting the Taliban enough

988
00:59:44,880 --> 00:59:49,800
Speaker 1: to stop those suicide bombers from getting through to American forces? Well,

989
00:59:49,840 --> 00:59:52,280
Speaker 1: we shouldn't be trusting the Taliban at all. Since the

990
00:59:52,360 --> 00:59:55,720
Speaker 1: Doha Talks, they have demonstrated their unwillingness to abide by

991
00:59:55,800 --> 00:59:59,000
Speaker 1: any agreement or commitment that they've made. Look, this isn't

992
00:59:59,000 --> 01:00:02,880
Speaker 1: an evacuation. This is a hostage situation. We're not doing

993
01:00:02,960 --> 01:00:07,120
Speaker 1: aid evacuation. We're asking the Taliban to release these hostages.

994
01:00:08,320 --> 01:00:10,840
Speaker 1: I don't know who's kidding who, but the Taliban can't

995
01:00:10,840 --> 01:00:14,800
Speaker 1: be trusted, shouldn't be trusted. And this and this uh

996
01:00:15,240 --> 01:00:20,400
Speaker 1: this uh uh strategic communications campaign, their wrning seems to

997
01:00:20,480 --> 01:00:23,040
Speaker 1: have a lot of people fooled. General kimmen, we have

998
01:00:23,320 --> 01:00:25,920
Speaker 1: had a lot of academic experts on and they really

999
01:00:25,960 --> 01:00:30,080
Speaker 1: emphasize the tribal nature of society among Sunni and she

1000
01:00:30,600 --> 01:00:34,840
Speaker 1: You are truly expert at tribal tensions from the Levant

1001
01:00:34,960 --> 01:00:40,040
Speaker 1: all the way over east into Afghanistan and indeed to Pakistan.

1002
01:00:40,640 --> 01:00:44,560
Speaker 1: Please advise us on the new relationship America will have

1003
01:00:45,120 --> 01:00:50,120
Speaker 1: with the fractured Pakistan. Well, first of all, this this

1004
01:00:50,240 --> 01:00:53,640
Speaker 1: is less about the shoe Sunni Shia divide UH, and

1005
01:00:53,680 --> 01:00:57,640
Speaker 1: it's more about tribal politics, and candidly, it's about Pakistan's

1006
01:00:58,320 --> 01:01:04,200
Speaker 1: UH supposed national security concerns where they want to use Afghanistan.

1007
01:01:04,280 --> 01:01:07,280
Speaker 1: It's sort of a ford border between them and India.

1008
01:01:07,360 --> 01:01:11,760
Speaker 1: They don't want to be surrounded UH. Candidly, even though

1009
01:01:11,880 --> 01:01:15,840
Speaker 1: Pakistan is expressing grief and sorrow for what happened yesterday,

1010
01:01:16,720 --> 01:01:20,360
Speaker 1: we know the Pakistani fingerprints all over the support of

1011
01:01:20,400 --> 01:01:24,480
Speaker 1: the Taliban, and candidly could very well be UH their

1012
01:01:24,560 --> 01:01:27,640
Speaker 1: support for isis K. This is a country that harbored

1013
01:01:28,040 --> 01:01:32,240
Speaker 1: Osama bin Laden for years UM and the relationship that

1014
01:01:32,280 --> 01:01:36,600
Speaker 1: we have with them is somewhat questionable. But they have

1015
01:01:36,680 --> 01:01:39,600
Speaker 1: forty nuclear weapons and we certainly don't want to have

1016
01:01:39,840 --> 01:01:43,479
Speaker 1: their government overturned and taken over by a bunch of

1017
01:01:44,200 --> 01:01:47,440
Speaker 1: tribal types inside of Pakistan. General Kibet, before we let

1018
01:01:47,440 --> 01:01:50,120
Speaker 1: you go, you were talking about the messiness of the operation,

1019
01:01:50,160 --> 01:01:51,920
Speaker 1: and I want to talk about some of the strategy.

1020
01:01:52,720 --> 01:01:56,280
Speaker 1: What would the rationale be for abandoning the Bagram air

1021
01:01:56,400 --> 01:02:00,880
Speaker 1: base and not just in focusing resources on the Kabbal Airport. Yeah, look,

1022
01:02:00,920 --> 01:02:05,080
Speaker 1: I'm I'm a little bit UH conflicted about that issue

1023
01:02:05,120 --> 01:02:09,400
Speaker 1: with Bagram Airport. Yeah, it's more secure, but it's also

1024
01:02:09,600 --> 01:02:12,280
Speaker 1: much further out in the Taliban would have set up

1025
01:02:12,360 --> 01:02:18,320
Speaker 1: checkpoints um for anybody to get to the Bagram airfield.

1026
01:02:18,400 --> 01:02:23,840
Speaker 1: So yeah, I think it's convenient excuse, but Bogram, while

1027
01:02:23,880 --> 01:02:26,240
Speaker 1: it was easier to defend, it would have been harder

1028
01:02:26,280 --> 01:02:29,360
Speaker 1: for people to evacuate too, because it's so far away

1029
01:02:29,360 --> 01:02:32,120
Speaker 1: from the city of Kabul. General Kimmitt, what do you

1030
01:02:32,160 --> 01:02:35,400
Speaker 1: tell the man the woman coming out of the class

1031
01:02:35,440 --> 01:02:40,560
Speaker 1: of two thousand twenty one at West Point Um. This

1032
01:02:40,640 --> 01:02:42,840
Speaker 1: is a long war. It's been going on since the

1033
01:02:42,920 --> 01:02:47,200
Speaker 1: nine eleven and it's not going to stop anytime soon.

1034
01:02:47,680 --> 01:02:49,720
Speaker 1: You need to look at what your predecessors from the

1035
01:02:49,800 --> 01:02:52,600
Speaker 1: last twenty years have done to defend this country and

1036
01:02:52,640 --> 01:02:54,960
Speaker 1: you better rock up and be ready to defend it

1037
01:02:54,960 --> 01:02:57,240
Speaker 1: as well. Mark Kimmitt, we look forward to speaking to

1038
01:02:57,320 --> 01:03:00,560
Speaker 1: you again. Mark Kimmitt, I retired Brigadier General and of

1039
01:03:00,600 --> 01:03:03,880
Speaker 1: course working with the Bush administration as Assistant Deputy Assistant

1040
01:03:04,080 --> 01:03:07,160
Speaker 1: Director of Defense for the Middle East. This is the

1041
01:03:07,200 --> 01:03:11,880
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

1042
01:03:11,920 --> 01:03:15,360
Speaker 1: from seven to ten am Eastern on Bloomberg Radio and

1043
01:03:15,480 --> 01:03:19,760
Speaker 1: on Bloomberg Television each day from six to nine am

1044
01:03:19,800 --> 01:03:23,560
Speaker 1: for insight from the best in economics, finance, investment, and

1045
01:03:23,680 --> 01:03:30,200
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

1046
01:03:30,360 --> 01:03:33,959
Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm

1047
01:03:34,000 --> 01:03:36,680
Speaker 1: Tom Keene, and this is Bloomberg