WEBVTT - Surveillance: Jackson Hole 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily, we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.880 and of course on the Bloomberg terminal. Michael McKee whether 0:00:31.000 --> 0:00:32.879 wearing many hats this morning and right now we're going 0:00:32.920 --> 0:00:36.280 to rapidly digress here to a gentleman like Paul Booker 0:00:36.400 --> 0:00:39.760 from New Jersey, Raphael Bostick. What an interesting path out 0:00:39.800 --> 0:00:43.040 of Harvard and Stanford, really first rate academics and a 0:00:43.560 --> 0:00:47.479 different fed president Michael indeed, and now the president of 0:00:47.520 --> 0:00:51.239 the Atlanta Federal Reserve, Rafael Bostick, and we welcome you 0:00:51.360 --> 0:00:54.520 to Surveillance this morning. At you're in Atlanta, where it's 0:00:54.560 --> 0:00:57.320 gonna be a lot warmer. I looked this morning, Rafael, 0:00:57.360 --> 0:01:00.280 and it was thirty seven degrees out on the back 0:01:00.360 --> 0:01:03.560 lawn of the Jackson Lake Lodge. So in some ways 0:01:03.560 --> 0:01:05.959 we're better off. It's not as it's not as beautiful, 0:01:06.000 --> 0:01:09.119 but in subways we're better off. Uh, let me ask 0:01:09.160 --> 0:01:11.280 you first about the numbers that we just got four 0:01:11.319 --> 0:01:14.240 point two percent on the year over year headline PC 0:01:14.640 --> 0:01:17.640 three point six percent for the core. Is that out 0:01:17.680 --> 0:01:20.720 of line at all with what you were anticipating? And 0:01:20.760 --> 0:01:25.080 does that maybe put more pressure on you to decide 0:01:25.120 --> 0:01:29.840 you would like to see sooner taper? Well, Mike, first 0:01:29.840 --> 0:01:31.720 of all, I'm glad we're not sitting out in thirty 0:01:31.720 --> 0:01:35.800 degree weather. Uh. That makes for a much less comfortable interview. Uh, 0:01:36.160 --> 0:01:38.280 you know. And and for the numbers that came out today, 0:01:38.319 --> 0:01:39.959 you know, I've I've been in studio, so I have 0:01:40.000 --> 0:01:44.120 not a chance to look at the numbers, UM more deeply. 0:01:44.480 --> 0:01:46.920 But I would say this sort of number is not 0:01:47.000 --> 0:01:49.400 a It's not a huge surprise for me. We know 0:01:49.600 --> 0:01:52.240 that there have been a lot of price pressures, UM, 0:01:52.440 --> 0:01:56.600 and those have continued. UM. I heard you guys talking 0:01:56.760 --> 0:01:59.720 before about the notion of transitory and you know when 0:01:59.720 --> 0:02:02.760 I to businesses, but they've told me is that, UM, 0:02:02.760 --> 0:02:05.800 this is episodic. They do believe that this is really 0:02:05.880 --> 0:02:09.720 driven by the pandemic circumstance. But what it also become 0:02:09.800 --> 0:02:11.760 clear is that this episode is gonna last longer than 0:02:11.760 --> 0:02:15.280 people expected. So UM, we're trying, We're going to figure 0:02:15.280 --> 0:02:19.480 out how to incorporate that into our modeling. I would say, 0:02:19.520 --> 0:02:22.520 for me, what I'm seeing is really consistent with the 0:02:22.520 --> 0:02:25.520 outlook that I had before. So I'm still comfortable that 0:02:25.600 --> 0:02:28.840 we're on a good trajectory with the economy and we 0:02:28.880 --> 0:02:31.880 should still see fairly robust growth. Llow, we put you 0:02:31.880 --> 0:02:34.400 on the other side of that big mahogany table at 0:02:34.440 --> 0:02:38.040 the FED and those who might argue for a delay, 0:02:38.080 --> 0:02:40.640 is there an argument there because what seems to be 0:02:40.680 --> 0:02:43.160 happening is a problem on the supply side, and you 0:02:43.200 --> 0:02:47.640 guys address the demand side. Well, it's certainly true that 0:02:47.680 --> 0:02:50.680 there are supply side challenges, and you know, you've, I've 0:02:51.360 --> 0:02:55.720 we've all heard many stories about supply chain issues and 0:02:55.800 --> 0:02:58.160 trying to get goods to product to meet the robust 0:02:58.160 --> 0:03:01.240 demand that's out there. I definitely worried about that and 0:03:01.280 --> 0:03:04.000 thinking about that. What I would also say, though, is 0:03:04.040 --> 0:03:07.799 that what we have seen and businesses consistently tell me 0:03:08.040 --> 0:03:13.160 they're getting having record volumes, the demand is super strong, uh, 0:03:13.200 --> 0:03:15.959 And so I don't think that pushes in a different 0:03:16.000 --> 0:03:19.040 direction than the types of things that we're thinking about 0:03:19.080 --> 0:03:22.520 in terms of removing some of the accommodation. I think 0:03:22.520 --> 0:03:25.359 the economy is performing extremely strong, and any weakness that 0:03:25.400 --> 0:03:27.000 we're going to see is just pulling us off of 0:03:27.360 --> 0:03:30.480 very high numbers. Initially, there seems to be a feeling 0:03:30.520 --> 0:03:34.079 on Wall Street that if you end tapering, and particularly 0:03:34.160 --> 0:03:36.600 if you do it quickly, that that will remove us 0:03:36.600 --> 0:03:39.600 support from the equity markets. Uh. The FED has been 0:03:39.640 --> 0:03:42.120 contributing to the big rise we have seen in the 0:03:42.160 --> 0:03:46.840 indexes and maybe even to inflation with QUWI purchases. How 0:03:46.960 --> 0:03:50.000 much do you worry about financial market stability with this 0:03:50.720 --> 0:03:54.520 switch in policy coming up? Well, you know, I always 0:03:54.560 --> 0:03:57.560 worry about financial stability. I think it's important that we 0:03:57.680 --> 0:04:01.080 make sure that our financial system remains wrong and resilient 0:04:01.400 --> 0:04:03.560 so they can provide the services that are needed for 0:04:03.600 --> 0:04:06.800 our economy. Uh. What I do think though, in terms 0:04:06.800 --> 0:04:10.680 of our policies is that we're really aimed at two 0:04:10.720 --> 0:04:14.760 other things. We're looking at maximum employment and stable prices. 0:04:14.960 --> 0:04:18.479 I think that we're doing a pretty well, uh, making 0:04:18.480 --> 0:04:21.400 good progress in both, which suggests that we should be 0:04:21.440 --> 0:04:24.279 trying to get our our our policies back into a 0:04:24.320 --> 0:04:27.400 more normal situation. You know, we've been at a very 0:04:27.440 --> 0:04:30.120 extreme level accommodation, and I think that the strength of 0:04:30.120 --> 0:04:33.839 the economy calls for us to pull off of that 0:04:33.880 --> 0:04:36.280 a little bit and let the economy stand on his own. Uh. 0:04:36.440 --> 0:04:40.680 We still have a fair amount of energy momentum. I 0:04:40.720 --> 0:04:44.480 think that we can do our tapering faster than we 0:04:44.640 --> 0:04:48.000 have in previous episodes because of that momentum and my 0:04:48.080 --> 0:04:51.600 expectations the economy will continue to operate in a strong way. 0:04:52.040 --> 0:04:56.159 We were talking earlier about whether the inflation impulse that 0:04:56.200 --> 0:05:00.440 we're seeing now will less longer than you anticipated. Is 0:05:00.480 --> 0:05:03.880 the idea of getting the taper underway, and uh, you 0:05:03.920 --> 0:05:06.840 have said, get it done fairly quickly, so that you 0:05:07.000 --> 0:05:10.559 have some freedom to be able to address interest rates 0:05:10.640 --> 0:05:15.320 if you need to. Well, I mean, certainly, I think 0:05:15.360 --> 0:05:18.360 it's important that we move one tool, one lever at 0:05:18.360 --> 0:05:22.480 a time. Uh. It's much more complicated to communicate what 0:05:22.480 --> 0:05:24.599 we're trying to accost with policy if we're moving interest 0:05:24.680 --> 0:05:28.239 rates and doing things and asset purchases at the same time. So, 0:05:28.600 --> 0:05:30.960 you know, getting the asset purchases done is going to 0:05:31.000 --> 0:05:33.640 be an important thing, uh, in terms of the sequencing 0:05:33.640 --> 0:05:36.560 of our policy. But I do really think about them 0:05:36.600 --> 0:05:39.720 in very different ways. UM. I think about a lot 0:05:39.760 --> 0:05:43.680 of the asset purchase impetus coming out of the deep 0:05:43.680 --> 0:05:46.840 recession that was triggered through the pandemic. UH. And as 0:05:46.880 --> 0:05:49.679 the economy has moved further and further away from those 0:05:49.760 --> 0:05:52.880 those lows, I think the need for the type that 0:05:53.080 --> 0:05:57.080 uh those purchases starts to decline. UH. And at that point, 0:05:57.160 --> 0:06:00.160 I think we should move on to other things. US 0:06:00.200 --> 0:06:02.400 that's done. I think what I'm going to do is 0:06:02.480 --> 0:06:05.320 really look at the data and have the data inform 0:06:05.400 --> 0:06:07.960 me as to how I should be thinking about when 0:06:08.000 --> 0:06:11.520 we should do lift off with interest rates. Right now, 0:06:11.560 --> 0:06:14.440 I have the that projected as the end of two. 0:06:14.720 --> 0:06:16.680 But you know, as I always say, a lot's going 0:06:16.720 --> 0:06:18.840 to happen between now and then, UH, and that will 0:06:18.920 --> 0:06:23.799 really inform the actual decision that we make in terms 0:06:23.839 --> 0:06:26.680 of when we start to move interest rates. Well, when 0:06:26.680 --> 0:06:29.599 you talk to CEOs in your district, or even the 0:06:29.720 --> 0:06:32.840 mom and pop stores in your district, what are they 0:06:32.839 --> 0:06:39.480 telling you about how long they think this inflation will last? Well? Yeah, 0:06:39.760 --> 0:06:42.440 they actually don't talk about it usually in terms of inflation. 0:06:42.800 --> 0:06:45.320 They talk about it in their ability to meet product demand. 0:06:45.360 --> 0:06:48.680 And so business leaders UH that I talked to UH 0:06:48.800 --> 0:06:52.640 tell me that the supply chain challenges are significant. What 0:06:52.720 --> 0:06:54.479 we thought were going to be or what they thought 0:06:54.480 --> 0:06:57.279 were going to be short term challenges are starting to 0:06:57.320 --> 0:07:01.080 look like they're gonna last a bit longer into too UH, 0:07:01.080 --> 0:07:03.680 and that has implications for what's going to happen in 0:07:03.760 --> 0:07:06.440 terms of prices. But I do think and I think 0:07:06.440 --> 0:07:08.840 it's important for everyone to keep this in mind. This 0:07:08.920 --> 0:07:12.360 is all part of an episode, and so I've I've 0:07:12.360 --> 0:07:14.880 moved away from transitory or permanent and really try to 0:07:14.920 --> 0:07:18.880 talk about this as an episodic uh period of inflation. 0:07:19.360 --> 0:07:23.160 And for me, with a long episode, the thing that 0:07:23.200 --> 0:07:26.320 I'm going to be most concerned about is whether people 0:07:26.360 --> 0:07:28.640 start to take the length of the episode as a 0:07:28.680 --> 0:07:31.160 signal that they need to start doing things fundamentally differently. 0:07:31.520 --> 0:07:34.080 Because if that's true, then a lot of the relationships 0:07:34.080 --> 0:07:37.480 that we've seen historically may not hold any longer, and 0:07:37.480 --> 0:07:39.680 we may do to think about our policies differently. So 0:07:39.720 --> 0:07:41.200 a lot of the surveys that we're going to be 0:07:41.240 --> 0:07:45.200 doing on inflation expectations and the like, um, those are 0:07:45.200 --> 0:07:47.920 going to be the things that will inform what makes 0:07:47.960 --> 0:07:51.120 the best sense for for policy moving forward. Raphail. The 0:07:51.120 --> 0:07:54.360 theme of this conference the title is Macroeconomic Policy in 0:07:54.400 --> 0:07:57.320 an uneven economy at this point. Do you think that 0:07:57.320 --> 0:07:59.960 there one and twenty billion dollars of monthly bond purchase 0:08:00.200 --> 0:08:03.680 is helps even out the unequal recovery or do you 0:08:03.720 --> 0:08:06.560 think it exacerbates at this point given the recovery and 0:08:06.600 --> 0:08:09.960 the labor market some of the inequalities, given the fact 0:08:10.160 --> 0:08:13.720 that lower rates and better financial conditions tends to help 0:08:13.760 --> 0:08:18.480 wealthier individuals more because of their assets. Well, you know, 0:08:18.520 --> 0:08:20.680 I think of the purchases, the goal is really to 0:08:20.720 --> 0:08:23.880 make sure that the economy stays robust so that people 0:08:23.880 --> 0:08:26.480 come and get employed, because if you don't have a job, 0:08:26.640 --> 0:08:29.800 then you're going to have a higher level of precariousness, 0:08:30.280 --> 0:08:35.599 and that precariousness could trigger and translate into uh, significant hardships. 0:08:35.800 --> 0:08:38.319 And I think so what I'm trying to weigh is 0:08:38.640 --> 0:08:42.040 sort of, uh, the hardships or the potential for hardships 0:08:42.480 --> 0:08:45.079 that many at the lower end of the wealth distribution 0:08:45.360 --> 0:08:49.960 could could face without a strong economy versus some of 0:08:49.960 --> 0:08:52.360 the benefits that are going to accrue to those at 0:08:52.360 --> 0:08:55.240 the top because we have a strong economy. Uh. And 0:08:55.360 --> 0:09:00.439 for me right now, the precariousness side is of more concern, uh, 0:09:01.200 --> 0:09:03.280 in part because of how the pandemic has played out. 0:09:03.320 --> 0:09:07.560 We know that in this pandemic, jobs at the lower 0:09:07.640 --> 0:09:10.120 end of the wate retributionn't have been hit much harder, 0:09:10.640 --> 0:09:13.720 and so there is an imperative that we make sure 0:09:13.720 --> 0:09:16.600 our policies are in position so they can come back 0:09:16.840 --> 0:09:19.760 more quickly. Uh. That is starting to happen now, and 0:09:19.760 --> 0:09:22.840 and for me, I found it heartening that a lot 0:09:22.840 --> 0:09:25.920 of those gaps in terms of job losses and categories 0:09:26.040 --> 0:09:29.000 are starting to narrow, and that gives me some comfort 0:09:29.080 --> 0:09:33.160 that the policies have been effective. Mike McKie, why don't 0:09:33.160 --> 0:09:35.360 you drop in here for one final question with the 0:09:35.400 --> 0:09:38.680 good President from Atlanta. Well, let me point out that 0:09:38.760 --> 0:09:41.120 the Good President from Atlanta is one of the voting 0:09:41.160 --> 0:09:45.240 members of the Open Market Committee this year, So what 0:09:45.400 --> 0:09:48.439 you say really matters. And I'm wondering, I'm sitting here 0:09:48.679 --> 0:09:50.480 listening to what you're saying, and I'm thinking of the 0:09:50.600 --> 0:09:52.880 how the print headlines are gonna say. You know, Bostick 0:09:53.000 --> 0:09:56.160 joins group of hawks. I'm wonder if this is really 0:09:56.200 --> 0:10:00.320 hawkish or if it's just time? Um is there? At 0:10:00.360 --> 0:10:03.880 some point would anybody notice in terms of market interest 0:10:03.960 --> 0:10:09.320 rates if you start cutting back on QUEWI purchases. So 0:10:09.520 --> 0:10:12.880 I actually think that the markets will not respond very 0:10:12.920 --> 0:10:15.920 strongly to this UM. The economy is in a very 0:10:15.920 --> 0:10:20.600 strong way and strong position, and I think the UH 0:10:21.040 --> 0:10:23.800 asset purchases at this point have been something of an 0:10:23.800 --> 0:10:27.920 insurance policy. I think that we don't need that insurance 0:10:27.960 --> 0:10:31.319 nearly as much as we have in previous episodes. Because 0:10:31.360 --> 0:10:34.320 of that, I think the markets are going to really 0:10:34.320 --> 0:10:37.760 absorb this pretty smoothly. And UH, we'll we'll see the 0:10:37.760 --> 0:10:41.480 economy continues to just roll on. Raphael Bostick, You more 0:10:41.520 --> 0:10:45.080 than anyone I know inside the Beltway has thought harder 0:10:45.120 --> 0:10:49.839 and harder about our nation's social policy, our fabric, your 0:10:49.920 --> 0:10:55.160 CV out of USC, etcetera. Is extraordinary. You talk years 0:10:55.160 --> 0:10:59.120 ago about trying to get the doors wider in America, 0:10:59.240 --> 0:11:03.280 having you do with housing in the black experience in America. 0:11:03.760 --> 0:11:08.160 Where are we right now? Can our institutions and particularly 0:11:08.160 --> 0:11:13.840 this FED get the doors open wider? Well, you know, 0:11:13.920 --> 0:11:16.720 I think we're definitely gonna try. And let me step 0:11:16.720 --> 0:11:18.840 back and start by saying, you know, the gaps in 0:11:18.880 --> 0:11:21.240 homeownership or as large as they've ever been since we 0:11:21.360 --> 0:11:24.120 started tracking this, UH, and that means that there is 0:11:24.440 --> 0:11:27.720 a challenge that we face in terms of UM families 0:11:27.800 --> 0:11:32.600 of of African, American and Latino backgrounds UM getting assets 0:11:32.640 --> 0:11:35.120 that allow them to accrue wealth. What I'll tell you 0:11:35.280 --> 0:11:38.439 is for the FED, our monetary policy and the policy 0:11:38.520 --> 0:11:41.360 framework that we announced last year is really designed to 0:11:41.440 --> 0:11:44.240 make sure that the employment market, the labor markets work 0:11:44.320 --> 0:11:47.920 better for all UH. And we are also advancing a 0:11:47.960 --> 0:11:50.319 number of other things we're convening. So we have a 0:11:50.440 --> 0:11:52.560 Racism in the Economy series to highlight a number of 0:11:52.559 --> 0:11:56.600 the barriers and potential solutions. We're working for, solutions in 0:11:56.679 --> 0:12:00.400 communities to try to make those differences to really change 0:12:00.440 --> 0:12:03.439 how the economy works for people UH and make sure 0:12:03.520 --> 0:12:06.600 their institutions are well positioned to succeed. So I think 0:12:06.640 --> 0:12:09.480 there's progress that can be made and I'm gonna work 0:12:09.520 --> 0:12:12.840 hard with my colleagues to a push to make that happen. 0:12:13.040 --> 0:12:21.440 Dr Boston, thank you so much for joining us today. 0:12:23.240 --> 0:12:25.920 What I love about this, folks, is everybody has a 0:12:25.960 --> 0:12:29.760 different path to their economic excellence. And Michael McKee, I 0:12:30.200 --> 0:12:33.120 don't think I've ever said this to see someone of 0:12:33.440 --> 0:12:38.000 interesting business academics and then took the toughest job in 0:12:38.040 --> 0:12:41.160 the country no, not the chairman of the FED. The 0:12:41.200 --> 0:12:44.720 president of the University of Delaware. That's a tough job. 0:12:45.360 --> 0:12:47.800 That was a tough job. And Pat Harker just totally 0:12:47.800 --> 0:12:52.960 bailed on that. Excuse me, the president of the Philadelphia Fed, 0:12:53.360 --> 0:12:55.600 and he joins us. Now, thank you very much for 0:12:55.720 --> 0:12:58.760 joining us. Pat, And as I mentioned Roba El earlier, 0:12:58.760 --> 0:13:01.400 we are a lot warmer here in the studio, and 0:13:01.520 --> 0:13:03.720 I'm sure you are in Philadelphia, then we would be 0:13:03.720 --> 0:13:05.720 on the back lawn at Jackson Lake Lodge where it 0:13:05.800 --> 0:13:09.199 was thirty seven degrees a short time ago. Uh, I'm 0:13:09.200 --> 0:13:12.880 wondering about heat. In terms of inflation, we got inflation 0:13:12.960 --> 0:13:17.000 numbers today. The headline PCE goes up to four point 0:13:17.040 --> 0:13:21.480 two percent, faster than you had anticipated and higher than 0:13:21.559 --> 0:13:24.280 had been anticipated by the Fed. Does that suggest to 0:13:24.320 --> 0:13:28.040 you that we might need to see uh, and I 0:13:28.080 --> 0:13:30.000 know taper comes first, but that we might need to 0:13:30.040 --> 0:13:35.600 see interest rates rise sooner than the market has been expecting. First. 0:13:35.640 --> 0:13:38.120 Good morning. Yeah, we're a little warmer, although I do 0:13:38.240 --> 0:13:42.760 miss the view. The view from my my office is 0:13:42.840 --> 0:13:46.440 my home office is a lot different. And go fighting 0:13:46.480 --> 0:13:51.199 blue hands, go University of Dolaware. So yeah, so on inflation. 0:13:51.360 --> 0:13:55.160 I mean, clearly it is a concern. Um. The word 0:13:55.200 --> 0:13:58.440 transitory I think has been used probably in some ways 0:13:58.600 --> 0:14:03.840 too much. Uh. But there are clearly sectors of the 0:14:03.880 --> 0:14:07.800 economy which are accelerating faster than others. That's always the case. 0:14:08.280 --> 0:14:12.320 The question in my mind to watch on inflation is 0:14:14.000 --> 0:14:18.320 are we seeing spillover from these COVID infected sectors to 0:14:18.400 --> 0:14:23.720 the non COVID infected sectors and our expectations becoming unanchored 0:14:24.240 --> 0:14:26.480 so far on the latter point, the answer is no, 0:14:27.240 --> 0:14:29.960 but it is clearly something we need to watch. And 0:14:30.000 --> 0:14:32.800 what we're hearing from our business contacts is that this 0:14:32.880 --> 0:14:37.680 may be longer lasting than we had expected they had expected, 0:14:38.360 --> 0:14:41.920 So is clearly a risk that we have to be 0:14:41.960 --> 0:14:45.440 cognizant of with respect to policy. Are those people telling 0:14:45.440 --> 0:14:49.080 you that they're going to have to keep raising prices 0:14:49.200 --> 0:14:52.960 in order to make up their margins? R I hear 0:14:53.000 --> 0:14:55.880 from our contacts business contexts they're working very hard not 0:14:55.960 --> 0:14:59.960 to raise prices. They are seeing some increase in productivity. 0:15:00.080 --> 0:15:03.520 Good news. This We are seeing across the economy and 0:15:03.640 --> 0:15:08.880 in individual sectors increases in productivity, which helps to mitigate 0:15:09.080 --> 0:15:12.720 some of the challenges they're facing but that doesn't completely 0:15:12.880 --> 0:15:16.080 get rid of them. So yeah, they're they're concerned about 0:15:16.080 --> 0:15:18.560 this right now. I think generally they're very concerned. One 0:15:18.800 --> 0:15:21.920 major national homebuilder I was talking to you recently said, 0:15:21.960 --> 0:15:25.000 you know, the supply chain disruptions we taught were temporary. 0:15:25.480 --> 0:15:28.960 It looks as temporary as we thought. They will eventually 0:15:29.000 --> 0:15:32.280 solve themselves, like appliances, But right now they're putting in 0:15:32.360 --> 0:15:35.640 used appliances and the new homes and promising to deliver 0:15:35.680 --> 0:15:38.119 a new appliance because they simply can't get the appliances 0:15:38.480 --> 0:15:41.840 in that case because of chips. To a large extent, 0:15:42.160 --> 0:15:44.720 we think about cars and chips, Well, there are chips 0:15:44.760 --> 0:15:49.200 in your dishwasher, and sometimes they don't work in my dishwasher. 0:15:50.960 --> 0:15:54.480 If if the rest of the Open Market Committee follows 0:15:54.480 --> 0:15:57.960 your advice and decides to start tapering fairly soon, what 0:15:58.040 --> 0:16:00.200 kind of message does that send at a time time 0:16:00.240 --> 0:16:03.680 when people are very unsure about the impact of COVID 0:16:03.720 --> 0:16:07.880 on the economy. So delta is clearly a problem, and 0:16:08.000 --> 0:16:10.040 the next one. It's not just going to be delta. 0:16:10.360 --> 0:16:13.360 First and foremost. We've got to get this endemic under 0:16:13.400 --> 0:16:16.200 control under way. To do that is get people vaccinated. 0:16:16.640 --> 0:16:19.840 It started with a health crisis. It's going to end 0:16:19.960 --> 0:16:23.680 by solving the health crisis, not by raising rates or 0:16:23.680 --> 0:16:26.840 lowering rates. So we need to keep that first and 0:16:26.920 --> 0:16:29.600 foremost right in front of our mind, and we need 0:16:29.640 --> 0:16:35.360 to tell everybody. So yeah, I mean, given that, given 0:16:35.360 --> 0:16:38.920 that this is a health crisis, I think we need 0:16:38.920 --> 0:16:41.680 to follow. As our colleagues and Raphael was just on 0:16:42.240 --> 0:16:44.680 have said, we really need to follow the data and 0:16:44.720 --> 0:16:48.560 see how things turn out over the next couple of months. 0:16:48.760 --> 0:16:53.560 We put these systems in place. We put this accommodation 0:16:53.560 --> 0:16:56.360 in place because of the health crisis, and we will 0:16:56.400 --> 0:17:00.000 be able to remove it now because we are slowly careful. 0:17:00.040 --> 0:17:02.520 We chipping away at the health crisis, but we're not 0:17:02.640 --> 0:17:06.440 there yet. We talked a lot about inflation this morning, 0:17:06.440 --> 0:17:09.720 but what about the labor market? Of the committee and 0:17:09.800 --> 0:17:13.400 it's minutes of the last meeting suggested you've made progress, 0:17:13.440 --> 0:17:15.520 but not nearly enough. And even if we get a 0:17:15.640 --> 0:17:19.160 similar jobs report next Friday to what we had, you're 0:17:19.160 --> 0:17:23.320 still gonna be about six million short. I'm wondering if 0:17:23.400 --> 0:17:28.040 you expect to make up that difference very quickly, or 0:17:28.080 --> 0:17:31.240 if the participation rate is going to stay low and 0:17:31.320 --> 0:17:35.400 that might change your thought about the proper path for policy. 0:17:35.760 --> 0:17:38.760 To separate two things there, it's a good question. One 0:17:38.920 --> 0:17:42.520 is the path of policy, but also, uh, what is 0:17:42.560 --> 0:17:47.040 causing this? Uh, what's causing this? It's not a lack 0:17:47.080 --> 0:17:49.960 of demand. It's clearly not a lack of demand. We 0:17:50.040 --> 0:17:52.719 see that in the JULT data, lots of open jobs. 0:17:53.240 --> 0:17:57.520 People are still concerned about coming back to work. People 0:17:57.520 --> 0:18:00.680 are concerned about getting on transit thing city like Philadelphia 0:18:00.880 --> 0:18:04.520 to get to the workplace. People are concerned about going 0:18:04.560 --> 0:18:07.600 to the restaurant with the delta variant, etcetera, etcetera. And 0:18:07.680 --> 0:18:11.719 so again. Until we solve those problems and childcare and 0:18:11.760 --> 0:18:15.919 all the other things holding people back from entering the workforce, 0:18:17.080 --> 0:18:20.359 that's going to be an issue. Unemployment insurance is rolling off, 0:18:20.520 --> 0:18:23.919 I mean the expanded unemployment insurance. We are starting to 0:18:23.960 --> 0:18:27.720 see some of those early early results from some states 0:18:27.760 --> 0:18:33.040 that removed the federal unemployment early. Yeah, you know, it 0:18:33.600 --> 0:18:36.040 doesn't seem like that's having a huge impact on getting 0:18:36.080 --> 0:18:39.359 more people into the labor force. It's these other factors life, 0:18:39.800 --> 0:18:43.240 but simply as life right, taking care of kids, taking 0:18:43.240 --> 0:18:47.560 care of elderly parents, getting to and from work, it's 0:18:47.600 --> 0:18:50.640 causing us. So what does that mean for policy? If that, 0:18:50.760 --> 0:18:55.080 if what I just said is true, then adding accommodation 0:18:55.160 --> 0:18:58.800 or keeping highly accommodative policy is not going to solve 0:18:58.840 --> 0:19:01.160 that problem. It's not going to close back gap. It's 0:19:01.280 --> 0:19:04.640 not a demand problem, it's a supply problem. Well within 0:19:04.680 --> 0:19:07.560 the Patrick Carker, I think you're best situated of anybody 0:19:07.600 --> 0:19:10.280 within the FED. I note that the Philadelphia FED was 0:19:10.400 --> 0:19:13.480 four or five of the American population sitting on one 0:19:13.520 --> 0:19:16.840 percent of the land. It's a micro cosm of this nation. 0:19:16.960 --> 0:19:23.960 The manufacturing index back great. What do you hear from 0:19:23.960 --> 0:19:27.159 the small, the mid and the large business people of 0:19:27.240 --> 0:19:32.000 your district? So they're nervous. I mean, I think generally 0:19:32.240 --> 0:19:36.720 people are nervous and about what the future holds. But 0:19:36.880 --> 0:19:39.199 that said, they are seeing lots of demand. I mean, 0:19:39.240 --> 0:19:43.000 our manufacturing contacts are manufacturing business Outlook survey. Although it's 0:19:43.040 --> 0:19:45.920 ticked down a little bit in terms of future activity, 0:19:46.400 --> 0:19:50.080 it's still an expansionary territory. Their biggest problem, and you 0:19:50.119 --> 0:19:53.040 know this is getting skilled labor. And by the way, 0:19:53.040 --> 0:19:54.840 we should put this in context and some of the 0:19:54.840 --> 0:19:57.800 work we're doing in the Philly FED. This problem of 0:19:57.880 --> 0:20:02.360 skilled labor and labor generally with us before the pandemic hit. 0:20:02.920 --> 0:20:06.880 The pandemic has just exascerbated the problem, it hasn't created 0:20:06.880 --> 0:20:12.159 the problem. We still need long term structural solutions to 0:20:12.359 --> 0:20:15.400 solving our labor woes, and that's kind of work we're 0:20:15.400 --> 0:20:18.240 doing in our community development function at the Philly Fed 0:20:18.280 --> 0:20:20.679 and really across the federal reserve system. Well. At the 0:20:20.680 --> 0:20:22.520 Philly Fed, you said something that I think is just 0:20:22.560 --> 0:20:25.440 fascinating Patrick, that some of the supply side issues that 0:20:25.480 --> 0:20:28.560 we're seeing in the labor market, the frictions there are 0:20:28.600 --> 0:20:31.960 not solved by monetary policy. This isn't something that holding 0:20:32.040 --> 0:20:34.240 rates low for a longer period of time or even 0:20:34.720 --> 0:20:37.520 up trying a hundred twenty billion dollars of bonds every 0:20:37.560 --> 0:20:40.160 month is going to solve in its own right. So 0:20:40.200 --> 0:20:43.679 how do you determine the potential negative ramifications from the 0:20:43.760 --> 0:20:46.960 ongoing a hundred twenty billion dollars of purchases with the 0:20:47.119 --> 0:20:50.960 lack of influence, frankly on solving these labor market dynamics. 0:20:52.000 --> 0:20:54.200 So I have been on record and I continue to 0:20:54.200 --> 0:20:56.720 be on record that I would like to start papering 0:20:56.800 --> 0:20:59.240 sooner rather than later. I'd like to start it sooner 0:20:59.320 --> 0:21:01.639 rather than later. And I like to keep keep it 0:21:01.640 --> 0:21:04.400 as simple as possible. The old engineer, and I'm trained 0:21:04.400 --> 0:21:06.880 as an engineer, you know, the old kiss principal, keep 0:21:06.880 --> 0:21:09.960 it simple, stupid. Let's just start this process. Let's get 0:21:09.960 --> 0:21:12.520 that over with and then we can start to think 0:21:12.520 --> 0:21:16.959 about the FED funds rate and normalizing the FED fundry. 0:21:17.040 --> 0:21:21.320 We're not there yet. I'm still forecasting late probably twenty 0:21:21.400 --> 0:21:25.000 three before we do lift off. But let's get the 0:21:25.080 --> 0:21:29.040 capering process underway. Mike, let's engineer this Jackson hole right now? 0:21:29.119 --> 0:21:32.000 Is this the Jackson hole? A complexity or simplicity? As 0:21:32.000 --> 0:21:34.880 a president speaks of, Well, it depends on whether you're 0:21:34.880 --> 0:21:38.160 reading the papers which are complex, or whether you are 0:21:38.920 --> 0:21:44.040 talking about raising interest rates or starting to taper. I'm wondering, Pat, 0:21:44.119 --> 0:21:46.840 if you think that starting to taper is going to 0:21:46.880 --> 0:21:52.560 have an impact uh this soon on the whole FED, 0:21:53.000 --> 0:21:56.160 the new framework. Uh, the idea that you're waiting. Will 0:21:56.200 --> 0:21:59.240 people take that the wrong way and think that you're 0:21:59.280 --> 0:22:04.240 giving up too soon? They might, But again I don't 0:22:04.240 --> 0:22:08.760 think that's that's appropriate. Uh. We have achieved our inflation 0:22:08.800 --> 0:22:12.720 goal essentially, I mean we're above two again. Good news, 0:22:12.960 --> 0:22:17.080 is explications have not become an anchored But we are 0:22:17.200 --> 0:22:22.440 averaging about two percent and keeping this accommodation through tapering 0:22:22.880 --> 0:22:26.040 there for a long period of time. Uh. And it's 0:22:26.080 --> 0:22:28.520 not solving the labor problem. That's not the problem. Just 0:22:28.560 --> 0:22:31.360 look at how many jobs are open in the US economy, 0:22:31.400 --> 0:22:35.320 the jokes data. I just think it's the proven thing 0:22:35.400 --> 0:22:39.120 to do to just take this first move and then 0:22:39.200 --> 0:22:41.760 let's see how things play out before we think about 0:22:41.800 --> 0:22:45.120 any change in At that country, we talked about whether 0:22:45.200 --> 0:22:49.000 or not the FED has contributed to inflation by propping 0:22:49.040 --> 0:22:51.520 up asset prices. A lot of people have said fiscal 0:22:51.600 --> 0:22:54.440 policy is contributing to inflation by putting a lot of 0:22:54.480 --> 0:22:56.800 money into the economy and now down and watching in 0:22:56.840 --> 0:23:00.600 their debating hundreds of billions more. Are you worried that that? 0:23:01.119 --> 0:23:03.960 Leaving aside the political merits of this, are you worried 0:23:03.960 --> 0:23:08.200 it could be inflationary? Let's start with what we know 0:23:09.000 --> 0:23:12.760 almost exists, not done yet, but the infrastructure bill. As 0:23:12.760 --> 0:23:15.880 an old civil engineer, I'm all for fixing our infrastructure. 0:23:16.000 --> 0:23:18.720