1 00:00:02,520 --> 00:00:07,080 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,360 --> 00:00:10,880 Speaker 2: We welcome our Bloomberg TV and radio audience worldwide. I'm 3 00:00:10,880 --> 00:00:14,080 Speaker 2: Matt Miller alongside Danny Berger. Joining us now is Federal 4 00:00:14,120 --> 00:00:17,400 Speaker 2: Reserve Governor Steven Myron here at the desk. 5 00:00:17,600 --> 00:00:18,960 Speaker 3: We're honored to have you here. 6 00:00:18,880 --> 00:00:23,120 Speaker 2: Along with Michael McKee, our international economics and policy correspondent. 7 00:00:23,200 --> 00:00:23,880 Speaker 3: Might take it away. 8 00:00:24,280 --> 00:00:26,560 Speaker 4: Well, good morning, Steve, Thank you for joining us on 9 00:00:26,640 --> 00:00:30,880 Speaker 4: this non jobs day, job's day. We get no government 10 00:00:31,040 --> 00:00:35,159 Speaker 4: primary economic data because of the shutdown right now, So 11 00:00:35,360 --> 00:00:38,760 Speaker 4: let me start by asking if that continues. As a 12 00:00:38,760 --> 00:00:41,560 Speaker 4: member of the Open Market Committee, would you feel comfortable 13 00:00:41,880 --> 00:00:44,839 Speaker 4: voting for a significant cut in interest rates if you 14 00:00:44,960 --> 00:00:48,880 Speaker 4: don't have data on employment and on inflation. 15 00:00:49,479 --> 00:00:51,599 Speaker 1: Good morning, and thanks for having me. Look, I think 16 00:00:51,640 --> 00:00:54,760 Speaker 1: it's important to recognize, first of all, that, as you're 17 00:00:54,760 --> 00:00:58,040 Speaker 1: pointing out, access to high quality data is of utmost 18 00:00:58,040 --> 00:01:02,640 Speaker 1: importance when making Montary Paul's decisions. However, it's also the 19 00:01:02,680 --> 00:01:05,280 Speaker 1: case that we don't make monetary policisions every day. Right 20 00:01:05,360 --> 00:01:08,839 Speaker 1: The FOMC meets to vote once every six weeks or so. Now, 21 00:01:09,240 --> 00:01:11,160 Speaker 1: I think that's a bit longer than most shutdowns have 22 00:01:11,240 --> 00:01:13,840 Speaker 1: historically lasted, so I'm hopeful that we'll get the data 23 00:01:13,840 --> 00:01:15,520 Speaker 1: by the time we actually have to make the decision. 24 00:01:16,440 --> 00:01:18,840 Speaker 4: Well, despite what the President says, as you well know, 25 00:01:18,959 --> 00:01:23,120 Speaker 4: inflation is rising, food prices are up, gasoline prices higher 26 00:01:23,120 --> 00:01:26,440 Speaker 4: than when he took office. Those are the prices that 27 00:01:26,480 --> 00:01:29,880 Speaker 4: Americans notice and hate. So isn't it a risk to 28 00:01:29,920 --> 00:01:36,760 Speaker 4: cut rates significantly in an regime where where inflation is rising. 29 00:01:37,319 --> 00:01:39,880 Speaker 1: So my view is that policy should be forward looking. Right, 30 00:01:40,200 --> 00:01:42,160 Speaker 1: I don't necessarily have a forecast that those items are 31 00:01:42,160 --> 00:01:44,000 Speaker 1: going to continue rising. In fact, I think that a 32 00:01:44,040 --> 00:01:48,200 Speaker 1: lot of them will actually reverse somewhat. But for my process, 33 00:01:48,240 --> 00:01:50,400 Speaker 1: what matters most of all is the cost of housing, 34 00:01:50,440 --> 00:01:53,880 Speaker 1: because that is the single largest component of the inflation process, 35 00:01:54,160 --> 00:01:56,200 Speaker 1: and it's also one of the things that people notice 36 00:01:56,240 --> 00:01:58,520 Speaker 1: the most. They notice when their rent surges, they notice 37 00:01:58,520 --> 00:02:00,640 Speaker 1: when the cost of shelter increases, and that's why it 38 00:02:00,640 --> 00:02:03,400 Speaker 1: gets the largest weight in the inflation in disease. And 39 00:02:03,480 --> 00:02:06,160 Speaker 1: my expectation is that we've just experienced, you know, the 40 00:02:06,200 --> 00:02:09,639 Speaker 1: biggest population shocks to both the upside and the downside 41 00:02:09,800 --> 00:02:12,080 Speaker 1: in my lifetime, and I think in most people's lifetimes, 42 00:02:12,320 --> 00:02:14,240 Speaker 1: and to me, it'd be very surprising if that left 43 00:02:14,240 --> 00:02:16,240 Speaker 1: no lingering trace on the price of shelter. And so 44 00:02:16,280 --> 00:02:19,919 Speaker 1: I am expecting a significant disinflation to the services component 45 00:02:20,240 --> 00:02:23,160 Speaker 1: of the inflation disease driven by shelter, which is affected 46 00:02:23,320 --> 00:02:25,600 Speaker 1: to an extent by changes in population growth. 47 00:02:25,880 --> 00:02:28,320 Speaker 4: Well, we were talking before we came on about your 48 00:02:28,400 --> 00:02:31,600 Speaker 4: view of our start the neutral rate. We've got inflation 49 00:02:31,720 --> 00:02:35,160 Speaker 4: running at basically three percent. You've got unemployment at four 50 00:02:35,160 --> 00:02:38,600 Speaker 4: point three percent, which is historically very low. The Atlanta 51 00:02:38,639 --> 00:02:41,239 Speaker 4: Fed says we're growing three point eight percent, or grow 52 00:02:41,360 --> 00:02:45,800 Speaker 4: three point eight percent in the third quarter. There's no 53 00:02:45,919 --> 00:02:48,280 Speaker 4: economic model that I know of that would get you 54 00:02:48,400 --> 00:02:53,359 Speaker 4: to a near zero neutral rate with those kind of conditions. 55 00:02:53,880 --> 00:02:54,120 Speaker 3: Yeah. 56 00:02:54,160 --> 00:02:57,320 Speaker 1: So, first of all, I have seen some folks argue 57 00:02:57,360 --> 00:02:59,720 Speaker 1: that they think that my conception of the neutral rate 58 00:02:59,760 --> 00:03:01,520 Speaker 1: is he That's not the case. I think that's a 59 00:03:01,560 --> 00:03:04,080 Speaker 1: misreading of the speech. If you read the speech carefully, 60 00:03:04,080 --> 00:03:05,760 Speaker 1: you'll notice that I do a weighted average of a 61 00:03:05,840 --> 00:03:09,480 Speaker 1: model implied X and ty and at market implied XANTY 62 00:03:09,600 --> 00:03:10,520 Speaker 1: rate and gets so. 63 00:03:10,480 --> 00:03:11,080 Speaker 3: About a half. 64 00:03:11,120 --> 00:03:12,880 Speaker 1: And that's consistent with the dot that I put down 65 00:03:13,200 --> 00:03:16,320 Speaker 1: on the statement on the Summary of Economic Projections. And 66 00:03:16,400 --> 00:03:18,640 Speaker 1: so I basically thought, you know, sort of going into 67 00:03:18,680 --> 00:03:20,799 Speaker 1: things last year, there were all these policies that were 68 00:03:20,800 --> 00:03:24,160 Speaker 1: pushing our star higher, Like the highest population growth we'd 69 00:03:24,160 --> 00:03:28,359 Speaker 1: seen in decades, the largest fiscal sustainable fiscal deficits we'd seen, 70 00:03:28,480 --> 00:03:31,040 Speaker 1: sustained fiscal deficits we'd seen in a really long time. 71 00:03:31,040 --> 00:03:33,079 Speaker 1: Those are pushing our star higher. So last year I 72 00:03:33,080 --> 00:03:34,519 Speaker 1: really thought it was at the top of the range 73 00:03:34,560 --> 00:03:36,360 Speaker 1: of where everyone else in the committee thought it was. 74 00:03:36,400 --> 00:03:38,160 Speaker 1: And I think it's now come down this year to 75 00:03:38,200 --> 00:03:39,440 Speaker 1: the bottom end of the range. 76 00:03:39,200 --> 00:03:41,360 Speaker 3: Of where everyone else thinks it is. But you can't 77 00:03:41,360 --> 00:03:44,720 Speaker 3: model that. What do you mean? I can't mombel the models. 78 00:03:44,760 --> 00:03:46,720 Speaker 4: If you put in the numbers that we have right now, 79 00:03:47,160 --> 00:03:50,200 Speaker 4: it wouldn't spit out year zero or half a percent 80 00:03:50,560 --> 00:03:52,119 Speaker 4: oh real rate. 81 00:03:52,520 --> 00:03:53,680 Speaker 3: Well no, but what I've done. 82 00:03:53,760 --> 00:03:56,880 Speaker 1: What I've done is modeled my expectations for inflation based 83 00:03:56,920 --> 00:04:00,600 Speaker 1: on the changes that I see happening from from housing. 84 00:04:00,640 --> 00:04:01,839 Speaker 3: As we talked about a moment ago. 85 00:04:02,080 --> 00:04:04,120 Speaker 1: I've modeled out changes to the output gap that I 86 00:04:04,120 --> 00:04:06,600 Speaker 1: expect to see from policies that expand the supply side 87 00:04:06,600 --> 00:04:09,160 Speaker 1: of the economy therefore expand potential output faster than they 88 00:04:09,160 --> 00:04:11,839 Speaker 1: would expand actual output. And some policies that we've seen 89 00:04:11,880 --> 00:04:13,440 Speaker 1: and acted over the course of this year would push 90 00:04:13,440 --> 00:04:15,760 Speaker 1: out potential and actual by the same amount or bring 91 00:04:15,800 --> 00:04:18,480 Speaker 1: in potential and actual by the same amount. Other policies 92 00:04:18,480 --> 00:04:20,480 Speaker 1: would push out one more than the other. And so 93 00:04:20,520 --> 00:04:22,280 Speaker 1: for an example of one that would push out one 94 00:04:22,279 --> 00:04:24,920 Speaker 1: more than the other would be deregulation, right. I think 95 00:04:25,000 --> 00:04:27,920 Speaker 1: that the regulatory state has been being peeled back over 96 00:04:27,960 --> 00:04:30,040 Speaker 1: the course of this year, and all indications are that 97 00:04:30,080 --> 00:04:35,160 Speaker 1: will accelerate, particularly as the pace of confirmations of appointees 98 00:04:35,279 --> 00:04:37,400 Speaker 1: has just picked up as well. That, in my mind, 99 00:04:37,440 --> 00:04:40,120 Speaker 1: will accelerate the pace of deregulation too. And when you 100 00:04:40,440 --> 00:04:43,560 Speaker 1: remove regulations, you expand the potential output of the economy 101 00:04:43,600 --> 00:04:46,280 Speaker 1: faster than actual output, and so that creates a positive 102 00:04:46,279 --> 00:04:46,960 Speaker 1: output gap. 103 00:04:47,320 --> 00:04:50,360 Speaker 2: I actually, you know, I'm not as deep into this 104 00:04:50,600 --> 00:04:53,520 Speaker 2: as Mike, and certainly neither of us is as deep 105 00:04:53,520 --> 00:04:55,440 Speaker 2: into it as you. But I have the tailor rule 106 00:04:55,480 --> 00:04:58,159 Speaker 2: function on my Bloomberg terminal. I love to play with it, 107 00:04:58,200 --> 00:05:01,680 Speaker 2: and I always ask important economists when they come on 108 00:05:02,320 --> 00:05:04,080 Speaker 2: what variables they would plug into it. 109 00:05:04,240 --> 00:05:05,760 Speaker 3: I put in zero point. 110 00:05:05,560 --> 00:05:09,080 Speaker 2: Five for you in the neutral rate here and I 111 00:05:09,120 --> 00:05:12,960 Speaker 2: put in four percent in the Nehru, I'm still only 112 00:05:12,960 --> 00:05:16,480 Speaker 2: getting three and a half for the tailor rule estimate. 113 00:05:17,040 --> 00:05:20,120 Speaker 2: I know this is a very elementary, you know function 114 00:05:20,240 --> 00:05:22,440 Speaker 2: here on the Bloomberg, But what would you change to 115 00:05:22,480 --> 00:05:26,040 Speaker 2: get you know, your rate down to where you think 116 00:05:26,040 --> 00:05:27,920 Speaker 2: it should be, which is even I think less than 117 00:05:28,080 --> 00:05:30,440 Speaker 2: the three percent terminal rate that the market is pricing in. 118 00:05:30,680 --> 00:05:33,839 Speaker 1: Yes, so let me be clear, montary policy works with lacks, right, 119 00:05:34,160 --> 00:05:36,640 Speaker 1: And yes, those lags are long and variable, but nevertheless 120 00:05:36,680 --> 00:05:39,400 Speaker 1: they exist. And so I think it's inappropriate to put 121 00:05:39,480 --> 00:05:42,400 Speaker 1: in the currents backward looking data as opposed to where 122 00:05:42,400 --> 00:05:44,080 Speaker 1: you expect those data to be in the near term, 123 00:05:44,200 --> 00:05:45,600 Speaker 1: right over the course of the next. 124 00:05:45,400 --> 00:05:46,400 Speaker 3: Year to two years or so. 125 00:05:46,800 --> 00:05:49,200 Speaker 1: And so that's why when I work through the calculations 126 00:05:49,200 --> 00:05:51,200 Speaker 1: that I work through in the speech, which also used 127 00:05:51,240 --> 00:05:53,760 Speaker 1: actually a couple of different specifications of the tailor rule, 128 00:05:54,000 --> 00:05:55,680 Speaker 1: I put in my expectations for. 129 00:05:55,640 --> 00:05:57,200 Speaker 3: Where I think inflation is going to be. 130 00:05:57,360 --> 00:06:00,479 Speaker 1: I put in my expectations for where I think where 131 00:06:00,480 --> 00:06:02,320 Speaker 1: I think the output gap is going to be. And 132 00:06:02,400 --> 00:06:04,400 Speaker 1: so when you look at inflation now on a year 133 00:06:04,400 --> 00:06:06,800 Speaker 1: over year basis, you're including lots of stuff that occurred 134 00:06:07,000 --> 00:06:10,240 Speaker 1: before the overall policy space shifted. And as I just 135 00:06:10,240 --> 00:06:12,919 Speaker 1: said a moment ago, we just lived through the largest 136 00:06:13,040 --> 00:06:16,280 Speaker 1: population growth shocks on both the upside and the downside 137 00:06:16,440 --> 00:06:19,560 Speaker 1: in very rapid succession to a variable the structure of 138 00:06:19,600 --> 00:06:22,799 Speaker 1: the economy. Population growth that usually changes only very very slowly, 139 00:06:23,120 --> 00:06:27,159 Speaker 1: changed incredibly rapidly in both directions. Right to use backward 140 00:06:27,200 --> 00:06:31,520 Speaker 1: looking data that just ignores that shock on the upside 141 00:06:31,520 --> 00:06:34,640 Speaker 1: of the downside, which was of monumental historical significance to 142 00:06:34,680 --> 00:06:37,560 Speaker 1: the US economy, I think is deeply misguided. I think 143 00:06:37,560 --> 00:06:41,040 Speaker 1: it's imperative to use forward looking forecasts that incorporate something 144 00:06:41,080 --> 00:06:41,400 Speaker 1: like that. 145 00:06:41,600 --> 00:06:43,839 Speaker 2: While we can do that with the tailor rule on 146 00:06:43,839 --> 00:06:45,560 Speaker 2: the Bloomberg terminal. As I'm sure you know, if you 147 00:06:45,560 --> 00:06:48,840 Speaker 2: click on the second tab of the function, you can 148 00:06:48,880 --> 00:06:53,159 Speaker 2: put in your inflation forecasts and your unemployment forecast going forward. 149 00:06:53,160 --> 00:06:56,600 Speaker 2: I won't ask you what all of your variables were, 150 00:06:56,640 --> 00:06:59,279 Speaker 2: but I will ask about inflation, because, as a kid 151 00:06:59,320 --> 00:07:02,560 Speaker 2: who grew up under Ronald Reagan, I've always been skeptical 152 00:07:02,640 --> 00:07:07,080 Speaker 2: of government policy when it comes to inflation. I've been 153 00:07:07,120 --> 00:07:09,640 Speaker 2: hearing for so many years that the FED wants to 154 00:07:09,640 --> 00:07:12,400 Speaker 2: get it to two percent, but I find it hard 155 00:07:12,440 --> 00:07:15,960 Speaker 2: to believe. And we've averaged three percent essentially on the 156 00:07:16,000 --> 00:07:19,080 Speaker 2: core since World War Two? Do you think most people 157 00:07:19,120 --> 00:07:21,760 Speaker 2: feel comfortable with that level? With a three percent level? 158 00:07:22,400 --> 00:07:25,080 Speaker 1: Well, you know, I think what you're asking sort of 159 00:07:25,320 --> 00:07:28,120 Speaker 1: invites a previous question, which is what did Congress assigned 160 00:07:28,120 --> 00:07:29,960 Speaker 1: the FED to do? And Congress assigned the FED to 161 00:07:30,000 --> 00:07:33,360 Speaker 1: pursue stable prices? Now, historically the FED has had lots 162 00:07:33,400 --> 00:07:35,360 Speaker 1: of leeway and how to interpret that, and it's chosen 163 00:07:35,400 --> 00:07:38,239 Speaker 1: to interpret that as two percent growth and measured personal 164 00:07:38,280 --> 00:07:39,920 Speaker 1: consumption expenditure inflation. 165 00:07:40,160 --> 00:07:40,400 Speaker 3: Right. 166 00:07:41,600 --> 00:07:44,680 Speaker 1: The way that you calculate inflation is sort of you know, 167 00:07:44,920 --> 00:07:47,840 Speaker 1: it's a very complex thing and there's lots of methological 168 00:07:47,920 --> 00:07:50,360 Speaker 1: choices that get made when you're sort of deciding how 169 00:07:50,360 --> 00:07:52,960 Speaker 1: the sausage gets made, and it can really affect how 170 00:07:53,000 --> 00:07:55,040 Speaker 1: things are measured. Right, And so when you say, do 171 00:07:55,400 --> 00:07:59,120 Speaker 1: households have faith that the FED is pursuing and achieving 172 00:07:59,280 --> 00:08:03,440 Speaker 1: its inflation? I think that, you know, sort of small 173 00:08:03,520 --> 00:08:06,960 Speaker 1: changes in measured inflation are difficult for households to detect 174 00:08:07,000 --> 00:08:09,160 Speaker 1: because they can be you know, because the way that 175 00:08:09,200 --> 00:08:11,960 Speaker 1: measured inflation is measured is there's lots of noise in it, 176 00:08:11,960 --> 00:08:14,120 Speaker 1: and I think that small changes in measured inflation are 177 00:08:14,200 --> 00:08:17,600 Speaker 1: usually dominated by the noise relative to what households are experiencing. 178 00:08:17,880 --> 00:08:20,800 Speaker 1: But nevertheless, when you look at inflation expectations, I think 179 00:08:20,840 --> 00:08:24,120 Speaker 1: that they remain reasonably well anchored, which indicates that households 180 00:08:24,160 --> 00:08:26,200 Speaker 1: and firms the United States have faith in the Fed's 181 00:08:26,520 --> 00:08:31,440 Speaker 1: ability and willingness and future of hitting its inflation it's 182 00:08:31,480 --> 00:08:32,120 Speaker 1: inflation target. 183 00:08:32,240 --> 00:08:35,560 Speaker 5: Governor Martin, you've been extremely transparent with your view and 184 00:08:35,600 --> 00:08:38,000 Speaker 5: have been very generous with that. You've always been very 185 00:08:38,080 --> 00:08:40,959 Speaker 5: transparent with your views. You're probably the most prolific social 186 00:08:41,040 --> 00:08:43,520 Speaker 5: media poster of anyone that the Fed's ever had. In 187 00:08:43,559 --> 00:08:46,600 Speaker 5: twenty twenty three, I saw you had tweeted something out saying, basically, 188 00:08:46,679 --> 00:08:50,360 Speaker 5: the case against adjustment cuts is that financial conditions have 189 00:08:50,440 --> 00:08:54,720 Speaker 5: eased massively, and policy works via financial conditions. Real rates 190 00:08:54,720 --> 00:08:57,640 Speaker 5: don't exist in a vacuum. Given that view, the fact 191 00:08:57,679 --> 00:09:00,280 Speaker 5: we have record high stock prices right now, well, is 192 00:09:00,320 --> 00:09:03,680 Speaker 5: it a sign of unsustainable froth of even a bubble 193 00:09:04,040 --> 00:09:06,720 Speaker 5: that will make bringing down inflation that much more difficult. 194 00:09:06,880 --> 00:09:07,840 Speaker 3: Yeah, So that's a great point. 195 00:09:07,920 --> 00:09:11,000 Speaker 1: Financial conditions are the channel through wich monetary policy works, 196 00:09:11,000 --> 00:09:13,520 Speaker 1: and so they matter when you're thinking about where monetary policy. 197 00:09:13,240 --> 00:09:14,400 Speaker 3: Should be set now. 198 00:09:14,480 --> 00:09:16,679 Speaker 1: As we were saying moments ago, my view is that 199 00:09:16,800 --> 00:09:20,600 Speaker 1: last year neutral was much higher because immigration was much higher, 200 00:09:20,880 --> 00:09:23,520 Speaker 1: because fiscal deficits were much higher than I expect. 201 00:09:23,240 --> 00:09:24,040 Speaker 3: Them to be going forward. 202 00:09:24,320 --> 00:09:27,319 Speaker 1: If you look at fiscal deficits this year in February 203 00:09:27,360 --> 00:09:29,439 Speaker 1: through August, which are the data that we have available 204 00:09:29,640 --> 00:09:32,640 Speaker 1: and that encompass after the policy space changed, there are 205 00:09:32,640 --> 00:09:35,720 Speaker 1: about four hundred billion dollars at an annualized rate below 206 00:09:35,920 --> 00:09:37,960 Speaker 1: where they were in the comparable period in the previous 207 00:09:38,000 --> 00:09:40,840 Speaker 1: fiscal year. So physical deficits are coming in also, and 208 00:09:40,880 --> 00:09:43,560 Speaker 1: that also helps drive down our star. So my view 209 00:09:43,600 --> 00:09:46,520 Speaker 1: is that policy, even though financial conditions appear to be 210 00:09:46,600 --> 00:09:50,160 Speaker 1: on some measures loose, policy has actually grown tighter because 211 00:09:50,200 --> 00:09:51,760 Speaker 1: neutral has migrated down. 212 00:09:52,120 --> 00:09:52,360 Speaker 3: Now. 213 00:09:52,400 --> 00:09:54,520 Speaker 1: I do want to be clear that financial conditions can 214 00:09:54,520 --> 00:09:57,559 Speaker 1: also be driven by variety of non monetary factors. There 215 00:09:57,559 --> 00:10:00,480 Speaker 1: have been substantial changes to the supply side of economy 216 00:10:00,520 --> 00:10:02,520 Speaker 1: this year, both through the tax code and through the 217 00:10:02,559 --> 00:10:06,720 Speaker 1: regulatory code, as well as trade renegotiation. Right, all of 218 00:10:06,760 --> 00:10:10,800 Speaker 1: that can affect financial conditions for non monetary purposes, sorry, 219 00:10:10,840 --> 00:10:13,439 Speaker 1: through non monetary channels. And so it can be a 220 00:10:13,440 --> 00:10:15,280 Speaker 1: little bit of a mistake to look at financial conditions 221 00:10:15,280 --> 00:10:18,480 Speaker 1: and infer something necessarily about the stance of monetary policy, 222 00:10:18,559 --> 00:10:20,000 Speaker 1: because they can be driven up by other things. 223 00:10:20,000 --> 00:10:21,319 Speaker 3: And also they're not all loose. 224 00:10:21,360 --> 00:10:24,800 Speaker 1: I mean, you know, housing finances arguably still a relatively 225 00:10:24,800 --> 00:10:25,400 Speaker 1: tight short. 226 00:10:25,280 --> 00:10:27,680 Speaker 5: But a lot of this view is incredibly forwardlooking. And 227 00:10:27,720 --> 00:10:30,000 Speaker 5: that's the point, right that we're not looking at backward data. 228 00:10:30,040 --> 00:10:33,160 Speaker 5: But is there any data that we could get Governor 229 00:10:33,200 --> 00:10:35,840 Speaker 5: Myron that would change your mind, and it would change 230 00:10:35,880 --> 00:10:37,840 Speaker 5: your mind to have you believe that we should not 231 00:10:37,960 --> 00:10:39,840 Speaker 5: be pushing towards more rate cuts right now? 232 00:10:39,920 --> 00:10:40,800 Speaker 3: Oh? Absolutely. 233 00:10:40,800 --> 00:10:43,400 Speaker 1: Look, my view is that services inflation is the most 234 00:10:43,400 --> 00:10:46,040 Speaker 1: persistent and sticky part of inflation. A lot of my 235 00:10:46,120 --> 00:10:48,960 Speaker 1: view about services inflation is driven by the housing sector, 236 00:10:49,320 --> 00:10:52,800 Speaker 1: as shelter costs are the largest costs for most families. 237 00:10:53,240 --> 00:10:55,680 Speaker 1: My view about shelter inflation, as I said, is driven 238 00:10:56,000 --> 00:10:57,800 Speaker 1: by two things, as I said in the speech, One 239 00:10:58,080 --> 00:11:01,040 Speaker 1: the facts that average rents have finally up to market rents, 240 00:11:01,080 --> 00:11:03,120 Speaker 1: meaning the catch a period is done. You know, people 241 00:11:03,120 --> 00:11:05,440 Speaker 1: don't reset their leases every day, they reset every year, 242 00:11:05,440 --> 00:11:07,600 Speaker 1: every couple of years, and so that means that a 243 00:11:07,720 --> 00:11:09,880 Speaker 1: change in market rents takes time to feed through to 244 00:11:09,920 --> 00:11:12,200 Speaker 1: when it's experienced by households. When you look at the data, 245 00:11:12,240 --> 00:11:14,160 Speaker 1: it seems to me that that catch a period is done, 246 00:11:14,200 --> 00:11:16,280 Speaker 1: which means that I expect shelter rents to come down 247 00:11:16,480 --> 00:11:19,120 Speaker 1: CPI rents to come down, bring shelter inflation down. The 248 00:11:19,160 --> 00:11:21,280 Speaker 1: second thing is the immigration shock that we talked about. 249 00:11:21,520 --> 00:11:24,080 Speaker 1: My view is that immigration was pushing rents up in 250 00:11:24,120 --> 00:11:26,240 Speaker 1: previous years, and now that shock has not only gone 251 00:11:26,240 --> 00:11:27,960 Speaker 1: to zero, I think it's actually reversed. I think we 252 00:11:27,960 --> 00:11:29,840 Speaker 1: have negative net migration when it comes. 253 00:11:29,679 --> 00:11:32,120 Speaker 3: To the United States this year. Right. So my view 254 00:11:32,160 --> 00:11:33,320 Speaker 3: is driven by two things. 255 00:11:33,400 --> 00:11:36,520 Speaker 1: Shelter sorry services are the more persistent and sticky part 256 00:11:36,559 --> 00:11:39,400 Speaker 1: of inflation. Services are driven in large part by housing, 257 00:11:39,600 --> 00:11:42,720 Speaker 1: and I expect housing inflation to come down through those channels. 258 00:11:42,960 --> 00:11:45,360 Speaker 1: If something were to happen that were to tell me 259 00:11:45,400 --> 00:11:48,360 Speaker 1: that that channel is invalidated, that there's some shock that's 260 00:11:48,400 --> 00:11:53,679 Speaker 1: going to be pushing rents materially higher, the benign inflation 261 00:11:53,760 --> 00:11:56,600 Speaker 1: forecast that I have would have to be adjusted as 262 00:11:56,600 --> 00:11:59,360 Speaker 1: a result. All else EQL right. If nothing else were 263 00:11:59,400 --> 00:12:01,719 Speaker 1: to change to off set that. But to me, that's 264 00:12:01,760 --> 00:12:04,520 Speaker 1: the core of my inflation view, and I would want 265 00:12:04,520 --> 00:12:07,000 Speaker 1: to see something come along and tell me that that 266 00:12:07,160 --> 00:12:09,360 Speaker 1: channel is wrong and that I'm thinking about it the 267 00:12:09,400 --> 00:12:09,840 Speaker 1: wrong way. 268 00:12:10,280 --> 00:12:12,320 Speaker 4: I want to ask you about something in your speech 269 00:12:12,360 --> 00:12:15,120 Speaker 4: that has confused a lot of people, including me. You 270 00:12:15,400 --> 00:12:18,280 Speaker 4: argue that tax cuts are going to help lower the 271 00:12:18,320 --> 00:12:22,680 Speaker 4: deficit by increasing economic activity, and at the same time 272 00:12:22,800 --> 00:12:27,840 Speaker 4: you argue that tariffs, which are taxes on the American people, 273 00:12:28,040 --> 00:12:31,240 Speaker 4: are going to lower the deficit. You have one way 274 00:12:31,559 --> 00:12:35,240 Speaker 4: raising taxes and the other cutting taxes at the same 275 00:12:35,320 --> 00:12:36,559 Speaker 4: time lowering the deficit. 276 00:12:36,600 --> 00:12:38,199 Speaker 3: How does that work? Yeah, So. 277 00:12:39,760 --> 00:12:41,640 Speaker 1: You know, it's important when you think about economics to 278 00:12:41,640 --> 00:12:45,400 Speaker 1: think about the elsses of supply and demand. And when 279 00:12:45,400 --> 00:12:49,480 Speaker 1: you cut taxes on American production, whether that's labor or 280 00:12:49,520 --> 00:12:52,920 Speaker 1: whether it's corporate income, you want to think about theses 281 00:12:53,240 --> 00:12:55,319 Speaker 1: supply of those activity and is going to lead to 282 00:12:55,360 --> 00:12:56,240 Speaker 1: additional labor supply? 283 00:12:56,320 --> 00:12:58,160 Speaker 3: Is it going to lead to additional investment? Right? 284 00:12:58,440 --> 00:13:00,720 Speaker 1: And so that's the way that cutting access can actually 285 00:13:00,800 --> 00:13:04,520 Speaker 1: generate economic growth in the United States. When you think 286 00:13:04,559 --> 00:13:07,360 Speaker 1: about tariffs again, you think about the ASSSITT as a 287 00:13:07,360 --> 00:13:10,760 Speaker 1: demand and supply. And in this case, American consumers and 288 00:13:10,800 --> 00:13:14,760 Speaker 1: firms are the demand and foreign producers are the supply. Now, 289 00:13:14,880 --> 00:13:18,760 Speaker 1: the economic evidence is overwhelmingly that the elasticity of the 290 00:13:18,800 --> 00:13:22,400 Speaker 1: demand in imports is much higher than the elasticity of 291 00:13:22,480 --> 00:13:26,079 Speaker 1: the supply. Put another way, foreign producers are inelastic. Right, 292 00:13:26,080 --> 00:13:29,080 Speaker 1: You've got a factory in China or somewhere else, and 293 00:13:29,120 --> 00:13:32,120 Speaker 1: it's stuck in China or wherever it is, it's installed capital. 294 00:13:32,120 --> 00:13:33,000 Speaker 3: It's inelastic. 295 00:13:33,360 --> 00:13:37,480 Speaker 1: Whereas American consumers can, American importers can alter their demand 296 00:13:37,559 --> 00:13:38,560 Speaker 1: power patterns. 297 00:13:38,760 --> 00:13:39,680 Speaker 3: They could import from. 298 00:13:39,640 --> 00:13:41,840 Speaker 1: China, but they also could import from Vietnam, or they 299 00:13:41,880 --> 00:13:45,080 Speaker 1: could or they could make stuff at home. That flexibility 300 00:13:45,160 --> 00:13:49,800 Speaker 1: gives them the ability to avoid the burden of the tariff. Now, 301 00:13:49,960 --> 00:13:53,240 Speaker 1: this is just tax incidence theory in public finance economics 302 00:13:53,240 --> 00:13:55,080 Speaker 1: one oh one. And when you look at it this way, 303 00:13:55,120 --> 00:13:58,120 Speaker 1: the argument that economists always reached. The conclusion that economists 304 00:13:58,160 --> 00:14:01,080 Speaker 1: always reach is that the burden of a tax, a tariff, 305 00:14:01,120 --> 00:14:04,920 Speaker 1: a substate, anything falls on the more inelastic party. Right now, 306 00:14:04,960 --> 00:14:07,439 Speaker 1: the evidence is overwhelmingly that the FIGM producers are the 307 00:14:07,440 --> 00:14:09,839 Speaker 1: more inelastic party because the factory is stuck in place 308 00:14:09,880 --> 00:14:13,840 Speaker 1: it can't move, whereas import demand can can substitute across borders. 309 00:14:14,040 --> 00:14:16,760 Speaker 1: So it is the case that the negative effects of 310 00:14:16,840 --> 00:14:20,520 Speaker 1: any tariff fall on the fall on the more inelastic party, 311 00:14:20,680 --> 00:14:24,360 Speaker 1: which is overwhelmingly the exporter and not the importer. And 312 00:14:24,400 --> 00:14:27,920 Speaker 1: so as a result, the positive effects of tax cuts 313 00:14:28,000 --> 00:14:30,760 Speaker 1: in the United States get felt by production and they 314 00:14:30,800 --> 00:14:34,240 Speaker 1: increase economic growth. Where is the negative effects of raising 315 00:14:34,280 --> 00:14:37,920 Speaker 1: revenue from tariffs get born by the get born by 316 00:14:37,920 --> 00:14:38,640 Speaker 1: the exporting country. 317 00:14:38,720 --> 00:14:40,840 Speaker 4: Well, we haven't seen any evidence in import prices that 318 00:14:40,920 --> 00:14:41,560 Speaker 4: that's happening. 319 00:14:42,360 --> 00:14:45,960 Speaker 1: Well, you know, import prices, as your points, dollar denominated 320 00:14:46,000 --> 00:14:48,960 Speaker 1: import prices, as you're pointing out, have been relatively flat. 321 00:14:49,040 --> 00:14:51,200 Speaker 3: However, I want to and people. 322 00:14:50,920 --> 00:14:53,560 Speaker 1: I think you're you're alluding to an argument that people make, 323 00:14:53,640 --> 00:14:55,360 Speaker 1: which is that you would think you would see import 324 00:14:55,360 --> 00:14:58,680 Speaker 1: prices decline if foreigners were reducing their selling prices. Is 325 00:14:58,720 --> 00:15:01,400 Speaker 1: that that's the argument referring to Yeah. To me, that 326 00:15:01,480 --> 00:15:04,800 Speaker 1: logic doesn't follow for two reasons. One, you know, it's 327 00:15:04,960 --> 00:15:07,800 Speaker 1: there's an implicit all else equal clause that's not being stated, 328 00:15:07,880 --> 00:15:09,880 Speaker 1: and all else is not equal. Because we also had 329 00:15:09,880 --> 00:15:11,920 Speaker 1: to move down to the dollar this year, which ought 330 00:15:11,920 --> 00:15:15,080 Speaker 1: to increase import prices by a comparable amount, and so 331 00:15:15,160 --> 00:15:18,080 Speaker 1: the fact that import prices look relatively flat could just 332 00:15:18,200 --> 00:15:21,560 Speaker 1: be the increase in import prices from the weeker dollar 333 00:15:22,080 --> 00:15:25,240 Speaker 1: just offsetting the decrease in dollar prices from the incidents 334 00:15:25,240 --> 00:15:28,040 Speaker 1: of the tariff being borne by the exporter. The other 335 00:15:28,120 --> 00:15:31,160 Speaker 1: reason why it doesn't really make sense to me is 336 00:15:31,200 --> 00:15:35,040 Speaker 1: because I think that a lot of the a lot 337 00:15:35,080 --> 00:15:39,240 Speaker 1: of the importers of record are ultimately US subsidiaries of 338 00:15:39,320 --> 00:15:42,840 Speaker 1: foreign companies. And so you've got a Japanese or German 339 00:15:43,040 --> 00:15:46,320 Speaker 1: exporter selling to the United States, but the exports are 340 00:15:46,360 --> 00:15:51,120 Speaker 1: bought by the exports are bought by US subsidiary of them, 341 00:15:51,160 --> 00:15:54,000 Speaker 1: so Mitsubishi Japan or whoever is selling to Mitsubishi US 342 00:15:54,040 --> 00:15:56,600 Speaker 1: or whoever right. And then if this is the case, 343 00:15:56,640 --> 00:15:59,560 Speaker 1: then what winds up happening is that the incidence ends 344 00:15:59,640 --> 00:16:03,840 Speaker 1: up falling on the falling on the importer of record, 345 00:16:04,000 --> 00:16:07,920 Speaker 1: without necessarily pushing a decline down in import prices. And 346 00:16:08,000 --> 00:16:09,920 Speaker 1: so I'm not exactly sure on the magnitude of this 347 00:16:10,000 --> 00:16:12,240 Speaker 1: channel yet. It's something that I'm looking into, but it 348 00:16:12,320 --> 00:16:15,680 Speaker 1: is a possible disruptor of that argument. 349 00:16:15,760 --> 00:16:17,920 Speaker 3: But in any case, for sure, what we're. 350 00:16:17,720 --> 00:16:21,000 Speaker 1: Seeing is not a broad based increase in consumer inflation 351 00:16:21,000 --> 00:16:22,000 Speaker 1: as resultive tariffs. 352 00:16:22,360 --> 00:16:25,400 Speaker 2: Governor, I want to ask about a piece that Mark 353 00:16:25,440 --> 00:16:30,200 Speaker 2: Summerlin wrote in the Wall Street Journal Today previously of 354 00:16:30,240 --> 00:16:35,360 Speaker 2: the NEEC under the Bush administration. Basically says that the 355 00:16:35,400 --> 00:16:38,840 Speaker 2: FED suffers from the same kind of bias inherent in 356 00:16:39,320 --> 00:16:44,280 Speaker 2: media or academia because it's so focused in the northeast. Right, 357 00:16:44,320 --> 00:16:48,520 Speaker 2: we have four FED banks between Richmond and Boston, and 358 00:16:48,640 --> 00:16:52,320 Speaker 2: only one west of Kansas, right, only two in the South. 359 00:16:52,600 --> 00:16:55,440 Speaker 2: He says there should be a FED bank in Miami 360 00:16:55,520 --> 00:16:57,360 Speaker 2: and Phoenix, which would make sense. 361 00:16:58,160 --> 00:17:00,320 Speaker 3: He also points out that of the six. 362 00:17:00,320 --> 00:17:03,080 Speaker 2: Hundred thousand dollars donated by FED staffers in the twenty 363 00:17:03,120 --> 00:17:06,800 Speaker 2: twenty four election cycle, ninety two percent went to Democratic candidates. 364 00:17:07,560 --> 00:17:10,720 Speaker 2: I assume that's because they're in the Northeast and they're 365 00:17:11,000 --> 00:17:12,560 Speaker 2: underpaid relative to Wall Street. 366 00:17:12,640 --> 00:17:15,240 Speaker 3: So can you make reforms. 367 00:17:14,960 --> 00:17:17,359 Speaker 2: Especially on those two issues, while you're at the FED. 368 00:17:17,800 --> 00:17:20,320 Speaker 1: Well, look, you know, reforms to the Federal Reserve, to 369 00:17:20,320 --> 00:17:22,399 Speaker 1: the structure of the Federal Reserve are ultimately an issue 370 00:17:22,400 --> 00:17:24,480 Speaker 1: for Congress to take up and not one for me 371 00:17:24,560 --> 00:17:27,960 Speaker 1: to address. But I do see part of my job 372 00:17:28,280 --> 00:17:33,320 Speaker 1: as bringing fresh an out of consensus ideas to what 373 00:17:33,359 --> 00:17:36,119 Speaker 1: can be you know, at times a settled way of thinking. 374 00:17:36,160 --> 00:17:38,119 Speaker 1: And that's what I'm going to continue doing. And so, 375 00:17:38,160 --> 00:17:40,399 Speaker 1: for example, you know, you sort of you think about 376 00:17:41,040 --> 00:17:43,800 Speaker 1: tariffs and whether they're causing inflation or not. I think 377 00:17:43,840 --> 00:17:46,119 Speaker 1: there's an attitude among a lot of people which is 378 00:17:46,160 --> 00:17:49,280 Speaker 1: that the correct counterfactual for thinking about tariffs is to 379 00:17:49,359 --> 00:17:52,159 Speaker 1: compare them to pre trends for what was the trend 380 00:17:52,200 --> 00:17:55,280 Speaker 1: in those goods before the pandemic? Right, to me, that's 381 00:17:55,320 --> 00:17:57,639 Speaker 1: the wrong counterfactional because there was so much else different 382 00:17:57,680 --> 00:17:59,719 Speaker 1: about the structure of the economy. When you look at 383 00:17:59,720 --> 00:18:02,520 Speaker 1: long from trends before the pandemic, they include you know, 384 00:18:03,480 --> 00:18:05,360 Speaker 1: you look at twenty year trends before the pandemic, which 385 00:18:05,359 --> 00:18:07,000 Speaker 1: is what a lot of people do. It includes the 386 00:18:07,080 --> 00:18:09,600 Speaker 1: entry of China to the WTO and shipping deflation to 387 00:18:09,640 --> 00:18:12,680 Speaker 1: the entire world. Is that the correct counterfactual for thinking 388 00:18:12,680 --> 00:18:16,400 Speaker 1: about the impact of tariffs on the economy today if 389 00:18:16,400 --> 00:18:18,640 Speaker 1: we're not experiencing the same deflation we experienced in two 390 00:18:18,640 --> 00:18:21,040 Speaker 1: thousand and four and goods when China had just entered 391 00:18:21,040 --> 00:18:25,280 Speaker 1: the WTO, and then attributing all excess inflation relative to 392 00:18:25,280 --> 00:18:27,640 Speaker 1: that pre trend to tariffs. I think that's the wrong 393 00:18:27,680 --> 00:18:30,919 Speaker 1: counterfactual for me. My mind is the right counterfactual is 394 00:18:30,960 --> 00:18:33,240 Speaker 1: non import goods. And that's why the way that I've 395 00:18:33,240 --> 00:18:36,320 Speaker 1: looked at it is to compare the prices of import intensive. 396 00:18:35,920 --> 00:18:37,960 Speaker 3: Core goods to overall core goods. 397 00:18:38,160 --> 00:18:40,720 Speaker 1: And I would think that if terrorists are driving inflation, 398 00:18:41,240 --> 00:18:44,240 Speaker 1: import intensive core goods would inflate at a materially higher 399 00:18:44,280 --> 00:18:46,119 Speaker 1: rate than overall core goods. And that is just not 400 00:18:46,240 --> 00:18:48,040 Speaker 1: the case. That is not what you see in the data. 401 00:18:48,160 --> 00:18:49,439 Speaker 1: That's the study that I did when I was the 402 00:18:49,480 --> 00:18:52,040 Speaker 1: CAA chairman, and I asked the FED staff to replicate it, 403 00:18:52,119 --> 00:18:53,960 Speaker 1: and they found that when you use this counterfactual, you 404 00:18:54,000 --> 00:18:55,920 Speaker 1: get the same outcome. Right, So the question is what's 405 00:18:55,920 --> 00:18:58,359 Speaker 1: the choice of the counterfactual, and that drives the decision, 406 00:18:58,400 --> 00:19:01,320 Speaker 1: that drives the inference from me. The other counterfacture that 407 00:19:01,359 --> 00:19:03,280 Speaker 1: I think appropriate to use is to say, our core 408 00:19:03,320 --> 00:19:05,640 Speaker 1: goods in the United States inflating at a faster rate, 409 00:19:05,720 --> 00:19:09,200 Speaker 1: at a noticeably faster rate or markedly different trend than 410 00:19:09,240 --> 00:19:11,880 Speaker 1: core goods in other countries. And again when I run 411 00:19:11,920 --> 00:19:16,680 Speaker 1: that experiment, I see no discernible, substantial difference that would 412 00:19:16,720 --> 00:19:19,000 Speaker 1: make me think that core goods inflation the United States 413 00:19:19,119 --> 00:19:22,040 Speaker 1: have broken away from core goods inflation globally, and so 414 00:19:22,119 --> 00:19:23,040 Speaker 1: for me, I think. 415 00:19:22,920 --> 00:19:24,800 Speaker 3: That there's a question of how do you think about 416 00:19:24,840 --> 00:19:25,160 Speaker 3: these things? 417 00:19:25,160 --> 00:19:27,280 Speaker 1: And I think everyone was thinking about it one way 418 00:19:27,320 --> 00:19:28,919 Speaker 1: and I think about it a different way. And I 419 00:19:29,040 --> 00:19:32,400 Speaker 1: view my job as bringing in new and interesting ideas 420 00:19:32,560 --> 00:19:34,320 Speaker 1: to try and get people to think about things different. 421 00:19:34,359 --> 00:19:36,600 Speaker 2: Can you do that when the ideological heart of the 422 00:19:36,640 --> 00:19:39,280 Speaker 2: FED is in New York, it's at Harvard University, it's 423 00:19:39,320 --> 00:19:41,760 Speaker 2: in the Democratic Party, how do you move it away? 424 00:19:42,000 --> 00:19:42,200 Speaker 3: Well? 425 00:19:42,280 --> 00:19:45,240 Speaker 1: I am also of New York and of Harvard University, 426 00:19:46,040 --> 00:19:49,200 Speaker 1: and have no trouble saying my view even when it's 427 00:19:49,240 --> 00:19:52,480 Speaker 1: wildly out of consensus, and you know, speaking my mind. 428 00:19:52,720 --> 00:19:54,320 Speaker 1: As long as I believe what I'm saying, I have 429 00:19:54,359 --> 00:19:57,760 Speaker 1: no problem sort of speaking in my mind and getting 430 00:19:57,760 --> 00:19:58,600 Speaker 1: my thoughts out there. 431 00:19:58,680 --> 00:20:00,679 Speaker 5: Well, Governor Miyane, it's not only the rest of the 432 00:20:00,800 --> 00:20:03,040 Speaker 5: FMC you have to convince. You have to convince these 433 00:20:03,080 --> 00:20:06,560 Speaker 5: markets as well, especially if you are concerned about housing. 434 00:20:06,800 --> 00:20:09,080 Speaker 5: You were very outspoken last year when the FED was 435 00:20:09,080 --> 00:20:11,439 Speaker 5: cutting and long term rates were going higher. If that 436 00:20:11,480 --> 00:20:15,280 Speaker 5: were to happen again, would you be proponent, especially as 437 00:20:15,280 --> 00:20:16,840 Speaker 5: you see one of the FED goals should be for 438 00:20:16,880 --> 00:20:18,920 Speaker 5: moderate long term rates, that the FED should be using 439 00:20:18,960 --> 00:20:21,919 Speaker 5: the balance sheet in order to keep long term rates lower. 440 00:20:22,640 --> 00:20:26,919 Speaker 1: So two things there. One, last year I was an 441 00:20:26,920 --> 00:20:29,240 Speaker 1: opponent of the Federal Reserve cutting rates because I thought 442 00:20:29,240 --> 00:20:31,399 Speaker 1: that neutral was higher and that therefore the FED was 443 00:20:31,440 --> 00:20:33,840 Speaker 1: not as restrictive as they thought that they were, and 444 00:20:33,920 --> 00:20:37,639 Speaker 1: therefore I viewed the accommodation being provided as inappropriate. And 445 00:20:37,680 --> 00:20:40,280 Speaker 1: I think, as you're pointing out that long yields moving 446 00:20:40,359 --> 00:20:43,800 Speaker 1: higher meant that I was actually kind of right. You know, 447 00:20:43,920 --> 00:20:46,720 Speaker 1: I think that that bears that out this time thus 448 00:20:46,800 --> 00:20:49,280 Speaker 1: far and still early days. The meeting was, you know, 449 00:20:49,320 --> 00:20:52,680 Speaker 1: two weeks ago, three weeks ago. You know, it's still 450 00:20:52,720 --> 00:20:55,360 Speaker 1: early days, but you know, thus far, we haven't seen 451 00:20:55,400 --> 00:20:57,359 Speaker 1: that type of increase in long eels that we saw 452 00:20:57,640 --> 00:20:58,199 Speaker 1: last year. 453 00:20:58,240 --> 00:21:00,000 Speaker 5: What if it were to happen, though, well, I'd be 454 00:21:00,080 --> 00:21:00,920 Speaker 5: using its spella sheet. 455 00:21:01,040 --> 00:21:02,960 Speaker 1: If it were to happen, The first thing I would 456 00:21:02,960 --> 00:21:05,320 Speaker 1: want to do is ask why, right, why is it happening? 457 00:21:05,359 --> 00:21:07,000 Speaker 1: And if I came to the conclusion that it was 458 00:21:07,000 --> 00:21:09,399 Speaker 1: happening because it was inappropriate to cut rates because my 459 00:21:09,560 --> 00:21:13,520 Speaker 1: inflation analysis was wrong, or my analysis of neutral or 460 00:21:13,520 --> 00:21:15,439 Speaker 1: the apput gap was wrong, then the first thing to 461 00:21:15,480 --> 00:21:17,840 Speaker 1: do is probably to reverse course on the front rate. 462 00:21:17,920 --> 00:21:20,760 Speaker 1: My view is probably not to sort of resort to 463 00:21:20,800 --> 00:21:23,600 Speaker 1: balance sheet at the first opportunity. That balance sheet is 464 00:21:23,600 --> 00:21:26,000 Speaker 1: the tool that you use when your more standard tools 465 00:21:26,440 --> 00:21:28,280 Speaker 1: can't work for the problem at hand. 466 00:21:28,920 --> 00:21:31,359 Speaker 4: A couple of lightning round questions here, as we're getting 467 00:21:31,359 --> 00:21:35,040 Speaker 4: a little short on time, do you think that if 468 00:21:35,080 --> 00:21:37,399 Speaker 4: you'd take in a sort of less extreme position, do 469 00:21:37,560 --> 00:21:41,160 Speaker 4: come in arguing for one hundred and fifty basis points 470 00:21:41,320 --> 00:21:44,120 Speaker 4: or so of cuts, that you might have more influence 471 00:21:44,600 --> 00:21:46,880 Speaker 4: on your peers on the Open Market Committee. 472 00:21:47,040 --> 00:21:49,840 Speaker 1: I don't think my position as extreme as you make 473 00:21:49,880 --> 00:21:54,480 Speaker 1: it sound. My dots for next year and the year 474 00:21:54,520 --> 00:21:57,359 Speaker 1: after are not so dissimilar from the rest of the committee. 475 00:21:57,520 --> 00:21:59,440 Speaker 1: All that's different is the fact that I want to 476 00:21:59,480 --> 00:22:01,800 Speaker 1: get there a little bit faster. I think that most 477 00:22:01,840 --> 00:22:04,639 Speaker 1: people on the on the FED, you know, sort of 478 00:22:04,640 --> 00:22:08,320 Speaker 1: they operate with. In your tailor rule application, you probably 479 00:22:08,359 --> 00:22:11,400 Speaker 1: have an inertial parameter right where there's a sluggish adjustment. 480 00:22:11,440 --> 00:22:13,919 Speaker 1: So wherever policy should be set, you sort of phase 481 00:22:13,960 --> 00:22:16,080 Speaker 1: it in slowly from where you are. So if you're 482 00:22:16,080 --> 00:22:18,200 Speaker 1: wildly off from where you are now, there would still 483 00:22:18,240 --> 00:22:20,440 Speaker 1: be a very slow adjustment to where policy should be set. 484 00:22:20,640 --> 00:22:22,159 Speaker 1: And I think that that's the type of thing that 485 00:22:22,240 --> 00:22:25,320 Speaker 1: some people sort of default have in their mind, right, 486 00:22:26,800 --> 00:22:28,920 Speaker 1: that's not my view. My view is that if policy 487 00:22:29,000 --> 00:22:31,080 Speaker 1: is out of whack you you should adjust it at 488 00:22:31,080 --> 00:22:34,040 Speaker 1: a reasonably at a reasonably brisk pace, in part because 489 00:22:34,080 --> 00:22:36,720 Speaker 1: if you stay restrictive for too long, you really run 490 00:22:36,760 --> 00:22:39,040 Speaker 1: the risk of bringing an applecap. 491 00:22:38,960 --> 00:22:41,160 Speaker 3: Materially wider that you that you don't want. 492 00:22:41,400 --> 00:22:43,480 Speaker 1: And in my mind, we're not at that point yet 493 00:22:43,520 --> 00:22:47,320 Speaker 1: because policy just became more restrictive, because monetary policy just 494 00:22:47,320 --> 00:22:50,800 Speaker 1: became more restrictive, because our star just moved down, Right, 495 00:22:51,040 --> 00:22:53,040 Speaker 1: We're not at the point yet where if you sort 496 00:22:53,040 --> 00:22:55,159 Speaker 1: of keep it there another day, it's a crisis. But 497 00:22:55,520 --> 00:22:58,200 Speaker 1: if you keep it there for an extra year, yeah, 498 00:22:58,240 --> 00:22:59,959 Speaker 1: I think you have you have problems on your hand. 499 00:23:00,440 --> 00:23:04,320 Speaker 4: Given the import that the President has attached to the FED. 500 00:23:04,520 --> 00:23:06,240 Speaker 4: As a member of the Board of Governors of the 501 00:23:06,240 --> 00:23:10,000 Speaker 4: Federal Reserve, do you feel like you exercise executive authority? 502 00:23:10,760 --> 00:23:13,480 Speaker 3: No, I don't exercise executive authority. Whatsoever? 503 00:23:14,200 --> 00:23:16,560 Speaker 4: Have you talked with the President or anybody at the 504 00:23:16,560 --> 00:23:18,560 Speaker 4: White House since you came to the FED. 505 00:23:18,960 --> 00:23:22,479 Speaker 1: Well, as I said, I think ago two weeks ago. 506 00:23:22,520 --> 00:23:24,399 Speaker 3: I don't remember. Time runs together for me these days. 507 00:23:25,560 --> 00:23:28,080 Speaker 1: The President called me after I was sworn into congratulating 508 00:23:28,280 --> 00:23:30,480 Speaker 1: and that was very generous of him to sort of 509 00:23:30,480 --> 00:23:33,640 Speaker 1: say congratulations. And he has never you know, he has 510 00:23:33,760 --> 00:23:35,600 Speaker 1: never asked me to sort of do to take a 511 00:23:35,640 --> 00:23:39,280 Speaker 1: specific policy action. He shares his views about where monetary 512 00:23:39,280 --> 00:23:41,120 Speaker 1: policy should be, but he shares that with the work 513 00:23:41,119 --> 00:23:41,960 Speaker 1: we talked to him. 514 00:23:41,760 --> 00:23:48,359 Speaker 4: Since that congratulatory call. No, no, one, very quick question. 515 00:23:48,440 --> 00:23:50,520 Speaker 4: Have you had your interview for FED chair yet? 516 00:23:51,080 --> 00:23:54,480 Speaker 3: No? I have not. And personal decisions are not decisions 517 00:23:54,480 --> 00:23:54,920 Speaker 3: that I make. 518 00:23:55,600 --> 00:23:58,199 Speaker 2: All right, Hey, thank you so much for coming in. 519 00:23:58,359 --> 00:24:01,320 Speaker 2: It's been a fantastic in you really appreciate you being 520 00:24:01,359 --> 00:24:06,280 Speaker 2: so forthright. Federal Reserve Governor Stephen Myron, as well as 521 00:24:06,520 --> 00:24:10,720 Speaker 2: Bloomberg's Michael McKee, our policy and economics correspondent. I will 522 00:24:10,760 --> 00:24:14,119 Speaker 2: add to our terminal clients that we do have an 523 00:24:14,160 --> 00:24:17,119 Speaker 2: adjustment for policy inertia in the tailor rule function. You 524 00:24:17,160 --> 00:24:19,000 Speaker 2: can see it on the terminal typing t A y 525 00:24:19,200 --> 00:24:19,600 Speaker 2: l go