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

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Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast.

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Speaker 2: I'm Tracy Alloway and Joe. I don't know about you,

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Speaker 2: but when I think about Alaska, I think about snow glaciers,

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Speaker 2: gold oil pipelines, northern exposure, small planes, and the twelfth

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Speaker 2: District of the Federal Reserve System of Banks.

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Speaker 3: Just literally the exact list that I think in that

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Speaker 3: precise order.

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Speaker 4: What a coincidence. I can't believe it.

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Speaker 2: All right, Well, we are in fact here in Alaska,

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Speaker 2: in Anchorage to be specific, and it's a really interesting

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Speaker 2: time to be taking a fuel trip to the very

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Speaker 2: very northern state because Alaska actually has a lot of

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Speaker 2: relevance to our current period.

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Speaker 3: So, you know, we used to talk about how like

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Speaker 3: Arizona is a very odd lossy staff. Oh yeah, and

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Speaker 3: I still think, but this is a very odd lots

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Speaker 3: state because there are so many specific things that we

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Speaker 3: hear about here, whether it's a demographic shift, oil obviously, logistics,

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Speaker 3: bgistics is huge. It's you just feel the presidence of

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Speaker 3: the various train and plane hubs and ship hubs here

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Speaker 3: in Alaska. So is in housing, which has a very

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Speaker 3: difficult housing environment here too, So it is a very

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Speaker 3: meaty area for us to do a coverage.

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Speaker 2: Absolutely, and we do, in fact have the perfect guests

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Speaker 2: to talk all about it. We are going to be

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Speaker 2: speaking with Mary daily. She is, of course, the San

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Speaker 2: Francisco Fed President and therefore the president of the twelfth district,

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Speaker 2: and Alaska is in that district, and she's here on

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Speaker 2: a trip and she's going to talk to us for

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Speaker 2: quite a while. So Mary, welcome to the show.

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Speaker 5: Thank you so much.

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Speaker 6: I'm delighted to be here, and I'm so delighted that

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Speaker 6: we're in Alaska together.

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Speaker 4: I was going to ask how often do you actually

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Speaker 4: come here?

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Speaker 5: I come regularly, But it's not just me.

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Speaker 6: Members of my team economists, our engagement officer, it's our

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Speaker 6: public engagement officers they come to. Ultimately, we're trying to

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Speaker 6: source information from all of our states, so we go

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Speaker 6: to all the states in our district, there's nine of them,

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Speaker 6: and we ask questions of all of them about how

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Speaker 6: they're living in the economy. What are the things that

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Speaker 6: concern them, what are the opportunities, what are the challenges?

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Speaker 3: So big picture, how's the Alaska economy right now? Or

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Speaker 3: what constitutes the Alaska economy.

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Speaker 6: Actually, well, let me tell you something I learned the

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Speaker 6: first time I came to Alaska. It isn't an economy,

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Speaker 6: it's a series of economies.

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Speaker 5: Right.

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Speaker 6: If you go to the more remote areas that you

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Speaker 6: can only say accessed by airplane, you can eat, there

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Speaker 6: are no roads. They live in a cash list economy

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Speaker 6: that's subsistence. That looks very different than Anchorage, where you're

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Speaker 6: using your digital wallet to pay for things locally. That

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Speaker 6: more familiar to the lower forty eight. And so really,

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Speaker 6: when you think of Alaska, you have to think of economies, communities,

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Speaker 6: and you have to imagine that the leaders here in

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Speaker 6: the population here has to come together to sure that

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Speaker 6: all the decisions they make serve the variety of needs

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Speaker 6: they have.

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Speaker 5: I think that's what makes it so rich.

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Speaker 6: It really is at the forefront of so many things

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Speaker 6: that can affect the national economy that it's a really

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Speaker 6: great place to learn.

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Speaker 2: Is Alaska of particular relevance at this particular moment in

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Speaker 2: time when you know, uncertainty is the word of the day.

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Speaker 2: We do have tariffs going on, Inflation is still a

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Speaker 2: lingering concern, and Alaska, of course doesn't already have a

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Speaker 2: high cost of living.

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Speaker 6: So you know, think about Alaska as right now a

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Speaker 6: leading indicator. They're sitting in the perfect storm, if you will,

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Speaker 6: of all the things going on in our economy. They

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Speaker 6: have a higher price level, and they've suffered even more

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Speaker 6: from rising inflation. They are thinking hard about how do

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Speaker 6: they import and how do they do this given the tariffs.

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Speaker 6: They are a recipient of a tremendous amount of federal

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Speaker 6: spending related to strategic defense and the military capacity and

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Speaker 6: even things like satellites. So they are right there and

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Speaker 6: so coming here and seeing how they're dealing with it. One,

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Speaker 6: it tells me how resilient our economy is more generally

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Speaker 6: to these different changes. And two, it provides me a

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Speaker 6: leading indication of how businesses in communities they're right there

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Speaker 6: on the forefront, are going to respond to this. And

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Speaker 6: I can use that information to look on the lower

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Speaker 6: forty eight, especially my states, and ask what are we

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Speaker 6: seeing there, So it gives me early insight into the

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Speaker 6: changes and how they're likely to affect the economy.

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Speaker 4: Joe Mary just did the intro better than I did.

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Speaker 3: I think resilient and scrappy feels like one of those

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Speaker 3: things where like every town in the world or every

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Speaker 3: city likes to describe their residents as such, but this

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Speaker 3: is like the first place I've been where I one

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Speaker 3: hundred percent believe it, And when hearing the stories of

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Speaker 3: people who've been here multiple generations, is like, okay, you actually,

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Speaker 3: I actually fully buy that. But it's interesting. So one

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Speaker 3: of the there's a lot to go down. But we've

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Speaker 3: heard about declining population levels, particularly in Anchorage, and it's

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Speaker 3: interesting to me because the San Francisco fad President, so

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Speaker 3: you have part of your district is wrestling with population decline,

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Speaker 3: and then also San Francisco itself this massive housing constrained

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Speaker 3: destination for labor right people want to go to make

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Speaker 3: their fortunes and a different kind of gold rush. But

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Speaker 3: talk to us about, like, you know, your perception of

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Speaker 3: the economic challenges in a place where there's a lot

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Speaker 3: of out migration, where it's difficult to say, keep young

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Speaker 3: people around.

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Speaker 5: It's very difficult. Alaska is not unique there.

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Speaker 6: You can look outside of my district to work the

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Speaker 6: code and other places and go to these rural communities

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Speaker 6: and they'll say, we want to keep our people and

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Speaker 6: it's hard to do it right. But What is particularly

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Speaker 6: true in Alaska is there's several things going on all

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Speaker 6: at once, and ultimately, when people decide to stay in

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Speaker 6: a place or come to a place, they want an

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Speaker 6: ecosystem of things that are important to their ability to thrive.

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Speaker 6: They want to have work, and not just work they

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Speaker 6: start when they're twenty two, but work that they can

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Speaker 6: grow into and maybe change into as they age. They

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Speaker 6: want to have housing opportunities so that if they want

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Speaker 6: to raise a family or if they just want to

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Speaker 6: own a home, they have that. At this point, there's

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Speaker 6: even trouble getting property, even if you're just leasing it,

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Speaker 6: so there's those types of pressure, so that's taking that risk.

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Speaker 6: And then if you're trying to build a family, there's

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Speaker 6: the schooling issues of population outflows mean that fewer schools

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Speaker 6: are available, So then the equation starts to break down.

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Speaker 6: And what really has to happen is they have to

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Speaker 6: believe that they can stay because something more prosperous will occur,

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Speaker 6: or that they really like the outdoors and being part

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Speaker 6: of this beauty. And I think that equations not penciling

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Speaker 6: it out like it was, because ultimately, if people don't

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Speaker 6: have jobs or place to live or see a bright

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Speaker 6: future for their career and their family. Then they will

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Speaker 6: feel forced to go elsewhere. And I think that's where

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Speaker 6: the state leadership, and this Anchorage leadership, and all the

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Speaker 6: business leaders I meet with, that's their fundamental concern. One

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Speaker 6: person put it this way, how do we attract people?

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Speaker 6: That's important, but how do we maintain them? How do

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Speaker 6: we retain the interest in us when our economy is

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Speaker 6: not doing as well as some competing economies in the

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Speaker 6: lower forty eight.

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Speaker 2: Well, on that note, can talk a little bit maybe

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Speaker 2: about the cost of living in Alaska, because this is

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Speaker 2: another thing that is, you know, somewhat unique. There are

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Speaker 2: higher prices for just simple things like groceries. Housing might

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Speaker 2: be constrained in a way that you wouldn't like necessarily

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Speaker 2: think about for a place as big as Alaska. But

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Speaker 2: this comes up quite a lot, and I'm very curious

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Speaker 2: how you're thinking about inflationary pressures on Alaska specifically, given

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Speaker 2: that over the past few years inflation was a concern

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Speaker 2: for all of the states, but I imagine it was

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Speaker 2: an extra concern here in this particular one.

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Speaker 6: Absolutely, you start with this just the recognition that almost

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Speaker 6: everything costs more in Alaska, why, Well, you have to

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Speaker 6: import a lot of the things that we take for granted,

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Speaker 6: you know, whether it's healthcare products or things that you

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Speaker 6: can use for your buildings, or simple groceries and shoes

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Speaker 6: and other things. Now we import a lot of that

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Speaker 6: stuff to the broader US, but the shipping costs to

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Speaker 6: come all the way up to Alaska and then distribution

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Speaker 6: across the Greater Alaskan region is very challenging. There's transportation

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Speaker 6: costs that if you only take that alone, really drive

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Speaker 6: up the prices. That's already a higher price level, and

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Speaker 6: then you add to it a higher inflation rate. Well,

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Speaker 6: then the pain that anyone might feel in the Lower

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Speaker 6: forty eight that's just magnified in Alaska. You put with

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Speaker 6: that the fact that in the twenty years ago, wages

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Speaker 6: in Alaska used to be higher than wages in the

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Speaker 6: Lower forty eight, but that gap is shrunk over the

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Speaker 6: last twenty years, and so now the wage levels are

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Speaker 6: roughly the same and the prices are a lot higher,

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Speaker 6: and inflation is driving those up more and things aren't

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Speaker 6: getting cheaper to import into Alaska. And I think that's

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Speaker 6: why people say, you know, it's just when I try

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Speaker 6: to build a property. I'm a builder, and now I

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Speaker 6: have to pay higher costs to ship things in, and

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Speaker 6: if I get tariffs on top of that on the

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Speaker 6: basic inputs, that just doesn't pencil out anymore.

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Speaker 5: And that's the equation they're dealing with.

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Speaker 6: It's just more expensive, it's harder, it's cold here, or

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Speaker 6: it's remote in many places, and all of those put

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Speaker 6: challenges that ultimately raise costs.

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Speaker 3: Probably, like the biggest question right now in the sort

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Speaker 3: of for the whole US is the degree to which

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Speaker 3: tariffs will be inflationary, the degree to which they'll be

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Speaker 3: passed on to consumers or absorbed by whoever. What specifically

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Speaker 3: are you hearing from businesses about what they can do

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Speaker 3: and the actual impact of tariffs on their operations.

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Speaker 6: Sure, I'll start with Alaska since we're here and I've

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Speaker 6: been meeting with businesses since I came, but I'll go

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Speaker 6: broaden it if you don't mind. So on the Alaska

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Speaker 6: we're hearing very similar things to what we hear in

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Speaker 6: the lower forty eight. We're hearing that they want to

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Speaker 6: pass it along to consumers because it's challenging to deal with,

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Speaker 6: but that consumers are exhausted, you know, that's a phrase

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Speaker 6: I hear a lot. Consumers are exhausted. I just don't

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Speaker 6: know how much they can do. They're already trading down.

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Speaker 6: If they used to go to one retailer, they're moving

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Speaker 6: to the next level down, showing up in the dollar

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Speaker 6: stores to try to find ways to make ends meet,

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Speaker 6: or they're just foregoing things that they might do in

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Speaker 6: the past. Those things put pressure on firms to say, well,

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Speaker 6: if I raise my prices, I'm going to lose my

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Speaker 6: sales and I have to pencil that equation out. So

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Speaker 6: I see more of them eating it into their profits

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Speaker 6: and then just hoping that they can either collectively go

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Speaker 6: to Washington and get an exception for whatever they're trying

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Speaker 6: to import or use, or they can weather the one

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Speaker 6: off terraf increase and then move to a more normal

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Speaker 6: So things, you know, in construction, you're hearing things like, well,

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Speaker 6: we move from steel framing to lumber framing wood framing

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Speaker 6: because steel was tariff and now we're looking for alternatives

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Speaker 6: that we can make here or have lower import costs.

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Speaker 2: So items like a serious trade off going from steel

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Speaker 2: to lumber framing.

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Speaker 6: Well, you know what's remarkable, and this is remarkable and

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Speaker 6: I think Alaska does this in ways that are even

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Speaker 6: more innovative than other places I've seen. Is construction and engineers.

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Speaker 6: They know how to build things and they know how

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Speaker 6: to make them durable. So you give them a set

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Speaker 6: of materials. It's almost like when you do those cooking

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Speaker 6: and they give you a box of things and they

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Speaker 6: say to the people, make something delicious. That's what construction

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Speaker 6: people and engineers are good about. They say, here's my

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Speaker 6: box of things. I'm going to make a house that's durable,

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Speaker 6: can last the cold climate, can be built on the permafrost.

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Speaker 5: I'm going to figure it out.

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Speaker 6: And I don't count them out because they're very good

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Speaker 6: at this, and it ultimately leads to the innovation that's

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Speaker 6: needed to deal with the higher costs. The problem is

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Speaker 6: it's happening all at once, and it makes it really

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Speaker 6: hard to innovate fast enough to offset the costs. So

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Speaker 6: I'm hearing passed through, but I'm not seeing a lot

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Speaker 6: of it. You saw this in the published data, spreading

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Speaker 6: it out past Alaska published data is coming out. Goods

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Speaker 6: price inflation is going up. It's not spilling over into

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Speaker 6: services inflation, either in housing or in services. You know,

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Speaker 6: what I think of as supercore services X housing. That's

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Speaker 6: good news, and the best sense from history and from

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Speaker 6: what's happening right now is that there won't be much

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Speaker 6: of an impasis so far to spill over that would

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Speaker 6: get into a persistent inflation problem. You can't count it out,

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Speaker 6: of course, but I don't think there's a lot of

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Speaker 6: evidence incurring.

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Speaker 2: I have a bunch more tariff questions. But since you

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Speaker 2: mentioned history just then, one thing I'm really curious about.

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Speaker 4: Is there anything we.

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Speaker 2: Can learn about how inflation expectations work from the Alaskan experience.

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Speaker 2: So this is a state where the higher cost of

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Speaker 2: living has been top of mind. When you start to

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Speaker 2: see those idiosyncratic developments in terms of prices, when people

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Speaker 2: are talking about something like tariffs, do you see expectations

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Speaker 2: for future rates of inflation ramp up faster here than

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Speaker 2: perhaps elsewhere in the US.

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Speaker 6: So there's not a lot of good data on state

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Speaker 6: wide inflation expectations. So we have to rely on talking

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Speaker 6: with people. And when I talk with people, they worry more,

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Speaker 6: but they don't there's a difference inflation expectations. The way

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Speaker 6: you can measure it is am I asking for a

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Speaker 6: higher wage am I going in and saying I can't

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Speaker 6: keep up I need a higher wage. And we don't

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Speaker 6: really see a difference here in Alaska than we do

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Speaker 6: in the lower forty eight. We just see that when

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Speaker 6: inflation gets derising fast and the labor markets tight, then

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Speaker 6: individual say I'm going to go ask my firm, and

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Speaker 6: the firms are more willing to give it. But now

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Speaker 6: that the labor market has softened, people aren't that interested

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Speaker 6: in going in and saying I want more money. It

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Speaker 6: also is consistent with them thinking that the tariffs are

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Speaker 6: a one off. The best way I know to think

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Speaker 6: about inflation expectations and kind of gather that type of

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Speaker 6: information is look at short term inflation expectations versus medium

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Speaker 6: and longer run inflation expectations. So all I can do

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Speaker 6: is ask I'll ask is that question, and I haven't

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Speaker 6: seen anything different than the published data for the nation,

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Speaker 6: which is short term arising, medium and longer run. They

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Speaker 6: still believe that we can get inflation down to two percent.

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Speaker 6: That suggests to me they think it's a one off.

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Speaker 6: Tariffs go up, you pay for them, and it's all

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Speaker 6: about managing the increased costs rather than thinking this is

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Speaker 6: just another run of inflation.

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Speaker 3: Maybe it's a process question, but you know, obviously when

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Speaker 3: it comes to the dual mandate, there's a lot of

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Speaker 3: good government data. Actually we should talk about data quality too.

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Speaker 3: But I'm curious, like, what is the additional thing that

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Speaker 3: you get out of these trips other I mean, it's

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Speaker 3: good to have anecdotes, it's good to make face to

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Speaker 3: face as their regional Fed president, But when you think

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Speaker 3: about incorporating your process or how it may even affect

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Speaker 3: future votes on interest rate decisions, what do these trips

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Speaker 3: add to official sources of the data.

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Speaker 6: Yeah, sure, absolutely, So the most important thing is that

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Speaker 6: I learned about how the economy actually works. It's very

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Speaker 6: difficult to know how tariffs will affect an economy if

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Speaker 6: you don't know how it works. It's very difficult to

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Speaker 6: know how inflation will affect the economy, or if the

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Speaker 6: housing crisis that they talk about is really larger than

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Speaker 6: the housing challenges you see in other places, or it's

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Speaker 6: the same. And importantly, it's not just a trip to

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Speaker 6: Alaska that informs that. It's a trip to a variety

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Speaker 6: of places that we and that's why regional Fed presidents

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Speaker 6: are out a lot because we're trying to collect the information.

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Speaker 6: That's one big reason to learn about it. You know,

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Speaker 6: when I take a tour of you know, a port,

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Speaker 6: or a manufacturing plant or a drilling facility, I'm learning

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Speaker 6: how those things work together so that I can better

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Speaker 6: understand how the economy will perform when they face a shock.

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Speaker 6: It's not all about the price of oil. It's about

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Speaker 6: how many workers do they have, what's the drilling, where

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Speaker 6: the bits? What are you working on? Where do you

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Speaker 6: get your things? So that's piece one. Piece two is

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Speaker 6: data are almost entirely backward looking. They tell you about

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Speaker 6: what happened last week, last month, last year, but you

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Speaker 6: can't make policy on backward looking data. So it tells

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Speaker 6: you where we are in level terms, but it doesn't

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Speaker 6: tell you where you're going. And so getting to talk

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Speaker 6: with people and actually ask them questions like this. I

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Speaker 6: asked this question all the time now, So you feel

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Speaker 6: really uncertain. I'm sure that's worrisome. Are you changing your

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Speaker 6: behavior because of it? And the first question is always yes,

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Speaker 6: we're very uncertain, and the second one has been we're

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Speaker 6: not changing our behavior entirely. So I'm continuing to invest,

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Speaker 6: but I'm not necessarily taking on riskier projects. I want

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Speaker 6: a good ROI if I'm going to keep going. So

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Speaker 6: I think that's another reason to come. And then the

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Speaker 6: third reason to come, and this is really important and

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Speaker 6: I think underappreciated, is the Federal Reserve Act created twelve

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Speaker 6: reserve banks and a board of governors and did so

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Speaker 6: if you go back and look at the original documents

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Speaker 6: to recognize that you can't make policy that serves a

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Speaker 6: nation if you only are in DC. But that gives

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Speaker 6: us a responsibility as reserve bank presidents to represent the

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Speaker 6: people who were serving in terms of learning about them

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Speaker 6: and bringing their collected information to help us make national policy.

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Speaker 5: So that's what we do.

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Speaker 6: And when we come, people feel like we are doing

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Speaker 6: the work on their behalf, and trust goes up. And

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Speaker 6: when trust goes up, as I've said many times and

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Speaker 6: many of my colleagues have, trust is one of our

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Speaker 6: most important tools because if people believe we can achieve

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Speaker 6: price stability and full employment, then they behave as if

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Speaker 6: we can achieve price stability and full employment, and that's

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Speaker 6: a virtuous cycle that actually delivers it faster.

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Speaker 2: This was going to be my next question, actually, and

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Speaker 2: again it's kind of a process question. But if your

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Speaker 2: job is to represent the twelfth district, and the twelfth

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Speaker 2: district has diverse states in it, and Alaska perhaps in

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Speaker 2: many ways is an outlier, how do you actually judge

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Speaker 2: I guess, or how do you make sure that you're

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Speaker 2: representing different interests? Perhaps different states might be at different

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Speaker 2: places in the economic cycle, and you're dealing with basically

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Speaker 2: an interest rate that tends to be a single, one

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Speaker 2: size fits all interest rate, a pretty blunt tool in

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Speaker 2: many ways, how do you balance that?

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Speaker 6: That's a great question, and I'll say it this way.

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Speaker 6: Representing the economies and the voices of the people doesn't

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Speaker 6: mean we're Transactually balancing the interest rates hurts you, it

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Speaker 6: helps you. Because we can't make national policy for any

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Speaker 6: particular region, not the twelfth district, not the first district,

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Speaker 6: not a state. And that's just part of the constraints

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Speaker 6: of our job. Right we have a dual mandate for

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Speaker 6: the nation. So you're aggregating up the data. But then

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Speaker 6: it's a mistake to think that if you have the

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Speaker 6: aggregate statistics, you know how the economy is faring. There

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Speaker 6: are many places where let's take tariffs in federal spending,

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Speaker 6: cuts and oil and gas drilling, read deregulation, that's happening

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Speaker 6: all in Alaska. So Alaska becomes the leading indicator in

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Speaker 6: many ways for how this is affecting the economy. So

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Speaker 6: if I see it here, I can then expect to

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Speaker 6: see at other places in some time periods. That would

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Speaker 6: not be true. Alaska would not be a leading indicator.

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Speaker 6: It would lag the economic performance of the country or

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Speaker 6: any economic changes. So you know your states and your

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Speaker 6: economy is well enough, and all my colleagues know their

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Speaker 6: states and economy is well enough that they know where

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Speaker 6: we are in the business cycle or the sequencing of things,

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Speaker 6: to know what states are leading, what states are following,

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Speaker 6: and then what states are being most impacted or less impacted,

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Speaker 6: so we can make better policy. The other way I

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Speaker 6: put it together is an interesting thing about how a

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Speaker 6: very diverse district is. You start to learn how similar

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Speaker 6: people are. Everybody wants the same thing. They want inflation

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Speaker 6: to be at target. They want to have economy that's

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Speaker 6: sustainably thriving, that sustainably available. They want to be rationally

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Speaker 6: inattentive to inflation and whether the economy is going to

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Speaker 6: be pushed into a recession. They just don't want to

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Speaker 6: think about it. And that's a universal truth. It doesn't

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Speaker 6: matter if I'm in Alaska, Hawaii, or Nevada, it doesn't matter.

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Speaker 6: Idaho feels the same way as California in that goal,

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Speaker 6: in that sense, and so I can go and see

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Speaker 6: to that point. Are people nervous? Are they optimistic? Are

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Speaker 6: they cautiously optimistic?

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Speaker 5: Today?

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Speaker 6: I see concerns, but when you really push them, and

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Speaker 6: this is true across the twelfth District, people are cautiously optimistic.

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Speaker 6: Some cities have more cranes than others, but everybody's got

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Speaker 6: a crane.

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Speaker 3: When we last had you on the podcast, when You're

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Speaker 3: coming through in New York City, we talked a little

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Speaker 3: bit about AI and you represent the home of the

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Speaker 3: most advanced AI models in the world. When you're out

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Speaker 3: here talk to many of these sort of old school industries,

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Speaker 3: do you talk to them or hear anything about tech

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Speaker 3: diffusion like the implementation of these and is there anything

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Speaker 3: interesting that you've picked up on that?

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Speaker 5: Absolutely?

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Speaker 6: Let me start with the most interesting thing I picked

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Speaker 6: up and I'll expand it to the other things. I

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Speaker 6: want to give a shout out to the small businesses.

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Speaker 6: So small businesses that can be promote across Alaska. It's

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Speaker 6: hard for them physically to reach marketplaces that are not

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Speaker 6: in their immediate area. They often have limited workforce availability

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Speaker 6: in some of these places, or just small businesses in general.

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Speaker 6: You're dealing with rising costs and so you want to

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Speaker 6: keep your portfolio of labor small. And they turn to

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Speaker 6: AI to do things that augment their output because they're

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Speaker 6: augmenting their skills so they can save time. They can

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Speaker 6: do You can write a marketing plan by asking one

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Speaker 6: of the AI models, here's my inputs. Can you write

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Speaker 6: a marketing plan? And already you're ahead. Can you write

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Speaker 6: me a pitch deck? Can you write me can you

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Speaker 6: tell me the five best marketplaces in the United States

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Speaker 6: for the products I want to set? All of this

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Speaker 6: makes it better, and it's not limited to that just

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Speaker 6: that kind of marketing and growth sales. It's actually also

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Speaker 6: about can I do things differently? So we were talking

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Speaker 6: to a small manufacturing firm not in Alaska, but I'm

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Speaker 6: hearing the same things here that said, we're able to

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Speaker 6: use AI to do first drafts of plans based on

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Speaker 6: the thirty year history of all plans we've ever made

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Speaker 6: to create this one small part that someone asked me

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Speaker 6: to machine. So those are the kinds of things that

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Speaker 6: I'm starting to see spread. Then, if you're a larger

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Speaker 6: business here in Alaska, you want to use AI just

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Speaker 6: like any other company in the nation to make sure

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00:21:38,040 --> 00:21:40,920
Speaker 6: you're not falling behind to get a competitive edge rights

438
00:21:41,000 --> 00:21:44,240
Speaker 6: These tools are helpful, and it's not just about reading

439
00:21:44,280 --> 00:21:46,760
Speaker 6: your emails faster or writing a draft to something. It's

440
00:21:46,800 --> 00:21:49,800
Speaker 6: about really thinking about your core business. What can I

441
00:21:49,880 --> 00:21:54,160
Speaker 6: do with AI that helps me save time and helps

442
00:21:54,240 --> 00:21:57,280
Speaker 6: me augment my existing workforce when we have often a

443
00:21:57,359 --> 00:21:58,399
Speaker 6: workforce shortage.

444
00:21:59,119 --> 00:22:01,920
Speaker 2: How are you thinking about AI generally? And one of

445
00:22:01,960 --> 00:22:04,800
Speaker 2: the reasons I ask this is because one of our

446
00:22:05,000 --> 00:22:07,919
Speaker 2: frequent guests, Neil Dutta, was writing a guest piece in

447
00:22:07,960 --> 00:22:10,680
Speaker 2: our newsletter today and he was talking about how there's

448
00:22:10,720 --> 00:22:13,879
Speaker 2: pressure on the housing market, there's pressure on consumers, and

449
00:22:13,920 --> 00:22:16,840
Speaker 2: then you have this third big trend in the US economy,

450
00:22:16,840 --> 00:22:20,840
Speaker 2: which is this massive investment boom in AI. And in

451
00:22:20,840 --> 00:22:23,680
Speaker 2: some sense, it feels like the AI investment boom is very,

452
00:22:23,760 --> 00:22:26,800
Speaker 2: very divorced from the health of the consumer and other

453
00:22:26,840 --> 00:22:29,440
Speaker 2: things going on in the economy. How are you factoring

454
00:22:29,480 --> 00:22:32,400
Speaker 2: that into I guess monetary policy and how you feel

455
00:22:32,440 --> 00:22:33,560
Speaker 2: about things more generally.

456
00:22:33,800 --> 00:22:37,480
Speaker 6: Well, it's very true that the AI investment boom does

457
00:22:37,520 --> 00:22:40,879
Speaker 6: it look like the you just look at stock market

458
00:22:40,920 --> 00:22:44,440
Speaker 6: prices and valuations, right, If you look at the companies

459
00:22:44,440 --> 00:22:47,880
Speaker 6: that are invested in AI development, they look different than

460
00:22:47,920 --> 00:22:50,480
Speaker 6: are AI support. They look different than the companies that

461
00:22:50,520 --> 00:22:52,919
Speaker 6: are doing mainline manufacturing. I mean, this is a fact,

462
00:22:53,600 --> 00:22:56,359
Speaker 6: but I don't see that as a competing interest. I

463
00:22:56,400 --> 00:22:59,800
Speaker 6: see that as that's a structural development that's just going

464
00:22:59,840 --> 00:23:01,919
Speaker 6: to keep going. And then on the other side, you

465
00:23:01,920 --> 00:23:04,439
Speaker 6: have the cyclical aspects of the economy, and people do

466
00:23:04,480 --> 00:23:08,040
Speaker 6: feel stressed. They've been dealing with high inflation and it's

467
00:23:08,040 --> 00:23:10,360
Speaker 6: coming down, of course, which is great news, but still

468
00:23:10,359 --> 00:23:14,040
Speaker 6: the price levels higher. They're dealing now with job security

469
00:23:14,080 --> 00:23:17,400
Speaker 6: issues like whether they're maybe even if they're not, it's

470
00:23:17,440 --> 00:23:20,400
Speaker 6: not true that they'll lose their job or layoffs around

471
00:23:20,440 --> 00:23:22,679
Speaker 6: the corner. They're nervous, and they say they're nervous, and

472
00:23:22,720 --> 00:23:26,360
Speaker 6: so you sense that I'm not sure about the future

473
00:23:26,600 --> 00:23:27,360
Speaker 6: kind of component.

474
00:23:27,600 --> 00:23:29,400
Speaker 5: I don't see those two things as competing.

475
00:23:29,720 --> 00:23:32,120
Speaker 6: As much as we have to manage in monetary policy,

476
00:23:32,359 --> 00:23:35,560
Speaker 6: the cyclical dynamics and it's very good in many ways

477
00:23:35,600 --> 00:23:37,080
Speaker 6: that there's something coming down.

478
00:23:36,920 --> 00:23:38,240
Speaker 5: The pipe that could be useful.

479
00:23:38,800 --> 00:23:43,080
Speaker 6: The question I have right now is our companies deploying

480
00:23:43,119 --> 00:23:46,000
Speaker 6: the technology and diffusing it at a more rapid rate

481
00:23:46,200 --> 00:23:48,840
Speaker 6: that offsets some of the concerns they had about tight

482
00:23:48,920 --> 00:23:50,920
Speaker 6: labor market. And I am seeing a little bit of that,

483
00:23:51,200 --> 00:23:53,760
Speaker 6: But mostly what I'm seeing is how are we going

484
00:23:53,840 --> 00:23:57,080
Speaker 6: to go forward faster, better, cheaper. How are we going

485
00:23:57,119 --> 00:24:00,520
Speaker 6: to up our game and not raise our in fact,

486
00:24:00,520 --> 00:24:02,560
Speaker 6: how were we going to get cost down? And AI

487
00:24:02,760 --> 00:24:06,360
Speaker 6: becomes something they can try. And you know a year

488
00:24:06,359 --> 00:24:08,399
Speaker 6: ago when we talked or whenever that maybe it was

489
00:24:08,440 --> 00:24:11,160
Speaker 6: only six months ago when we talked, we were doing

490
00:24:11,240 --> 00:24:13,800
Speaker 6: these CEO round tables as part of our Emerging Tech

491
00:24:14,000 --> 00:24:16,640
Speaker 6: Economic Research Network, so we do a lot of these

492
00:24:16,760 --> 00:24:19,359
Speaker 6: across all business types. And they were saying, we're not

493
00:24:19,400 --> 00:24:21,840
Speaker 6: doing it in front office operations. We're not doing in

494
00:24:21,920 --> 00:24:24,080
Speaker 6: our main product lines. We're only going to do back office.

495
00:24:24,359 --> 00:24:26,560
Speaker 6: Now it's moving to the front. Oh, if Matt tells

496
00:24:26,600 --> 00:24:29,000
Speaker 6: you something's changing. One of the things that I asked

497
00:24:29,040 --> 00:24:31,160
Speaker 6: somebody why and they said, it's just a lot easier

498
00:24:31,200 --> 00:24:33,800
Speaker 6: to do it than you think, and we can discipline

499
00:24:33,840 --> 00:24:36,680
Speaker 6: the models ourselves. We can prevent the nation by checking.

500
00:24:36,960 --> 00:24:38,359
Speaker 6: So now they feel more comfortable.

501
00:24:38,640 --> 00:24:41,119
Speaker 3: I feel like the change in model quality in the

502
00:24:41,200 --> 00:24:44,320
Speaker 3: last six months is really remarkable. It is remarkable, and

503
00:24:44,600 --> 00:24:48,080
Speaker 3: like many of the concerns about hallucinations, they still exist,

504
00:24:48,119 --> 00:24:50,439
Speaker 3: but they seem much less of a problem today than

505
00:24:50,520 --> 00:24:52,800
Speaker 3: even six months ago when you were playing with the

506
00:24:52,840 --> 00:24:55,320
Speaker 3: most advanced models. That being said said you talked about,

507
00:24:55,440 --> 00:24:58,320
Speaker 3: here's this potential productivity enhancer, and you said, I don't

508
00:24:58,560 --> 00:25:01,240
Speaker 3: coming down the pike, or I forget exactly the term.

509
00:25:01,640 --> 00:25:05,960
Speaker 3: Companies still trying it as of today. It doesn't feel like, Okay,

510
00:25:06,000 --> 00:25:10,360
Speaker 3: we've seen some great product general economy wide productivity gains. However,

511
00:25:10,760 --> 00:25:14,960
Speaker 3: what we do see is very high electricity prices, maybe

512
00:25:15,040 --> 00:25:18,520
Speaker 3: data centers playing some role. There's still per the ism,

513
00:25:19,000 --> 00:25:23,439
Speaker 3: continual shortages of electronic components. So are these very intense,

514
00:25:24,119 --> 00:25:27,800
Speaker 3: very intense capital demands at a time when AI hasn't

515
00:25:27,840 --> 00:25:31,480
Speaker 3: delivered economy wide productivity gains? Could there be an element

516
00:25:31,480 --> 00:25:34,000
Speaker 3: where there's like a crowding out element right now, or

517
00:25:34,119 --> 00:25:37,480
Speaker 3: like disproductivity from all that investment that hasn't paid off yet.

518
00:25:38,080 --> 00:25:41,040
Speaker 6: You know, there's always going to be this discontinuity put

519
00:25:41,040 --> 00:25:43,040
Speaker 6: in a time economist term, but there's always going to

520
00:25:43,040 --> 00:25:47,080
Speaker 6: be this discontinuity where you're waiting for the proceeds of

521
00:25:47,119 --> 00:25:50,200
Speaker 6: a technology you're investing in. Those take time and the

522
00:25:50,240 --> 00:25:53,520
Speaker 6: needs of that technology, especially something as power intensive as

523
00:25:53,560 --> 00:25:56,440
Speaker 6: AI at a time when we're also trying to modernize

524
00:25:56,480 --> 00:25:59,000
Speaker 6: the power grid because some of it just hasn't been

525
00:25:59,040 --> 00:26:01,959
Speaker 6: maintained across the states. So we have a number of

526
00:26:01,960 --> 00:26:05,200
Speaker 6: power company CEOs on our boards and councils, and they're

527
00:26:05,200 --> 00:26:07,280
Speaker 6: always telling us it takes so long to get a

528
00:26:07,280 --> 00:26:10,840
Speaker 6: transformer because there's bottlenecks. Now they're worrying about tariffs on

529
00:26:10,880 --> 00:26:14,640
Speaker 6: transformers and are the components of transformers. Then they're competing

530
00:26:14,680 --> 00:26:18,199
Speaker 6: with data center needs and companies and saying I'll just

531
00:26:18,200 --> 00:26:21,560
Speaker 6: build my own power to support this. And so that's

532
00:26:21,640 --> 00:26:24,840
Speaker 6: just a marketplace that was developed for a much smaller

533
00:26:24,920 --> 00:26:28,680
Speaker 6: footprint in power and now has to ramp up. That's

534
00:26:28,760 --> 00:26:32,080
Speaker 6: going to take time, and the proceeds from AI technology

535
00:26:32,240 --> 00:26:35,120
Speaker 6: are just nascent, which is not seeing them come through

536
00:26:35,160 --> 00:26:38,159
Speaker 6: in productivity. Some of the easy wins that a company

537
00:26:38,240 --> 00:26:40,439
Speaker 6: might have done probably are behind us. Or do you

538
00:26:40,440 --> 00:26:43,440
Speaker 6: think okay, do I need two copy editors or one. Well,

539
00:26:43,840 --> 00:26:46,240
Speaker 6: if I have one copy editor in AI, I'm okay.

540
00:26:46,400 --> 00:26:51,160
Speaker 6: But those are easy wins, right. The real transformational type

541
00:26:51,160 --> 00:26:53,840
Speaker 6: of productivity things are for things we haven't even really

542
00:26:53,880 --> 00:26:57,320
Speaker 6: thought of yet. I always use this example of thinking

543
00:26:57,320 --> 00:27:01,159
Speaker 6: about the original iPhone or smartphone against a BlackBerry. So

544
00:27:01,200 --> 00:27:02,639
Speaker 6: when it came out, I'm like, this is just a

545
00:27:02,680 --> 00:27:05,600
Speaker 6: fancy or BlackBerry, and then ultimately, of course I was

546
00:27:05,640 --> 00:27:11,120
Speaker 6: totally wrong. This was a much more just transformational technology

547
00:27:11,359 --> 00:27:13,960
Speaker 6: because we developed things on that technology.

548
00:27:14,480 --> 00:27:16,280
Speaker 2: I still miss the BlackBerry me too.

549
00:27:17,040 --> 00:27:18,400
Speaker 5: I tied so well on the.

550
00:27:19,080 --> 00:27:21,200
Speaker 2: I used to file stories just on the BlackBerry.

551
00:27:21,200 --> 00:27:25,000
Speaker 6: I could type entire epic novels on a BlackBerry. And

552
00:27:25,080 --> 00:27:27,680
Speaker 6: I've got the thumb problem of the thumbs meet in

553
00:27:27,720 --> 00:27:28,040
Speaker 6: the middle.

554
00:27:28,040 --> 00:27:28,800
Speaker 5: I'm on a Mini.

555
00:27:29,000 --> 00:27:31,879
Speaker 2: It's not working, okay, So just going back to the

556
00:27:32,000 --> 00:27:35,520
Speaker 2: vibes more generally. One thing that's already come up multiple

557
00:27:35,520 --> 00:27:37,679
Speaker 2: times in this conversation is the idea that if you

558
00:27:37,720 --> 00:27:40,280
Speaker 2: ask people what they think about the economy, they say like, oh,

559
00:27:40,600 --> 00:27:43,120
Speaker 2: it's not great. If you ask them what they think

560
00:27:43,119 --> 00:27:47,080
Speaker 2: about their own personal economic situations, they say they're fine.

561
00:27:47,359 --> 00:27:51,080
Speaker 2: And to the point about the tariffs earlier businesses, we'll say,

562
00:27:51,080 --> 00:27:53,920
Speaker 2: we're very worried. But on the other hand, they don't

563
00:27:53,960 --> 00:27:58,000
Speaker 2: seem to be changing their actual activity just yet. What's

564
00:27:58,040 --> 00:28:01,159
Speaker 2: your thesis or your theory for why we keep getting

565
00:28:01,160 --> 00:28:01,959
Speaker 2: that disconnect?

566
00:28:02,920 --> 00:28:05,880
Speaker 6: So this is not an uncommon disconnect by the way

567
00:28:05,960 --> 00:28:09,679
Speaker 6: people have been historically, and not all the time, of course,

568
00:28:09,880 --> 00:28:14,160
Speaker 6: but when they have concerns about the national economic progress,

569
00:28:14,480 --> 00:28:16,560
Speaker 6: they will tell you in poor sentiment, and when there's

570
00:28:16,560 --> 00:28:19,320
Speaker 6: a lot of transition, right to think of the transformations

571
00:28:19,320 --> 00:28:22,160
Speaker 6: we're going through. We're trying to bring down inflation, which

572
00:28:22,160 --> 00:28:26,159
Speaker 6: has been tiring, trying to think about bringing manufacturing and

573
00:28:26,200 --> 00:28:28,560
Speaker 6: other things back to the United States, think about deploying

574
00:28:28,720 --> 00:28:33,080
Speaker 6: a workforce that's domestically driven. Those are big transformations at

575
00:28:33,080 --> 00:28:35,399
Speaker 6: a time when people are looking at some of their

576
00:28:35,400 --> 00:28:39,040
Speaker 6: neighbors and saying, oh, I see Joe buying less things.

577
00:28:39,040 --> 00:28:40,760
Speaker 6: He didn't get a new car this year. He always

578
00:28:40,760 --> 00:28:42,840
Speaker 6: gets a new car. That's a lot of pressure. And

579
00:28:42,920 --> 00:28:46,200
Speaker 6: so with their own personal situation, they'll still being able

580
00:28:46,240 --> 00:28:48,400
Speaker 6: to go to the grocery, they can buy something for

581
00:28:48,440 --> 00:28:51,840
Speaker 6: their kids, they can invest in repairing their home or

582
00:28:51,880 --> 00:28:54,040
Speaker 6: going on a vacation, and so they feel okay, and

583
00:28:54,080 --> 00:28:56,440
Speaker 6: they also feel personally secure in their job, but they're

584
00:28:56,440 --> 00:28:59,880
Speaker 6: worried about the broader labor market. And I think that's natural.

585
00:29:00,560 --> 00:29:03,640
Speaker 6: And my theory is that when there's so much change,

586
00:29:03,840 --> 00:29:07,000
Speaker 6: people get worried. It doesn't matter if they think the

587
00:29:07,080 --> 00:29:09,200
Speaker 6: change is even good. They just get worried. And they're

588
00:29:09,200 --> 00:29:11,720
Speaker 6: worried that we're standing on One person put it this way,

589
00:29:11,720 --> 00:29:14,160
Speaker 6: I'm worried we're standing on a precipitous clip. I love

590
00:29:14,240 --> 00:29:17,000
Speaker 6: the view because I'm looking out. I'm fine, but you know,

591
00:29:17,040 --> 00:29:19,400
Speaker 6: anything can happen. Yeah, And so I think that anything

592
00:29:19,440 --> 00:29:22,240
Speaker 6: can happen. Piece makes them nervous, which is one of

593
00:29:22,240 --> 00:29:24,880
Speaker 6: the reasons. Another reason to come out and talk to

594
00:29:24,960 --> 00:29:27,320
Speaker 6: people is when they talk to people, I say, here's

595
00:29:27,360 --> 00:29:30,120
Speaker 6: what we're doing it, and here's how we would handle

596
00:29:30,160 --> 00:29:33,320
Speaker 6: something if we did look a bit tippy in the economy,

597
00:29:33,560 --> 00:29:34,240
Speaker 6: and that helps.

598
00:29:50,080 --> 00:29:52,160
Speaker 3: So you just gave a speech here in Alaska right

599
00:29:52,160 --> 00:29:54,720
Speaker 3: before we're recording this episode, and you said something interesting

600
00:29:54,920 --> 00:29:58,920
Speaker 3: in your speech. I'm forgetting that doorg, but something about

601
00:29:59,040 --> 00:30:00,760
Speaker 3: things are different, but they're not that different or that

602
00:30:00,840 --> 00:30:03,480
Speaker 3: in the past. This is not the first time people

603
00:30:03,520 --> 00:30:05,560
Speaker 3: have felt periods have change.

604
00:30:05,800 --> 00:30:07,880
Speaker 2: It's not the first time that central banks have had

605
00:30:07,920 --> 00:30:09,400
Speaker 2: to deal with Yeah, that's right, certain.

606
00:30:09,240 --> 00:30:11,440
Speaker 3: That's right, that's what it was. That basically, yes, things

607
00:30:11,480 --> 00:30:14,880
Speaker 3: are very uncertain, but this is the story of central banking.

608
00:30:15,000 --> 00:30:17,200
Speaker 6: It is indeed the story of central banking if you

609
00:30:17,240 --> 00:30:18,840
Speaker 6: were going to write a novel or do a whole

610
00:30:18,920 --> 00:30:20,320
Speaker 6: other podcast on central banking.

611
00:30:20,400 --> 00:30:22,000
Speaker 3: But there's never been a time where it's like, oh,

612
00:30:22,000 --> 00:30:23,760
Speaker 3: we know what's going on, We've got this something that

613
00:30:23,760 --> 00:30:24,720
Speaker 3: we know what the future.

614
00:30:24,480 --> 00:30:25,280
Speaker 5: Looks like exactly.

615
00:30:25,360 --> 00:30:28,240
Speaker 6: I mean, just let's think of my time at the

616
00:30:28,280 --> 00:30:31,160
Speaker 6: FED so far, so we had nine to eleven that

617
00:30:31,320 --> 00:30:35,680
Speaker 6: was pretty uncomfortably uncertain in traumatic At the same time,

618
00:30:35,840 --> 00:30:38,640
Speaker 6: then we had the global financial crisis that is a

619
00:30:38,840 --> 00:30:42,360
Speaker 6: tremendous period of uncertainty that lasted a number of years.

620
00:30:42,880 --> 00:30:46,240
Speaker 6: Then there was the pandemic that was not a very certain,

621
00:30:46,520 --> 00:30:48,920
Speaker 6: very clear time in our history. And so now we

622
00:30:49,000 --> 00:30:52,840
Speaker 6: have uncertainty, but it is not something that we are

623
00:30:52,960 --> 00:30:56,040
Speaker 6: unpracticed at. So I think that's why the important point

624
00:30:56,120 --> 00:30:58,960
Speaker 6: to read sure people on is we don't wait for

625
00:30:59,040 --> 00:31:02,080
Speaker 6: clarity before where we act, because if we did wait

626
00:31:02,120 --> 00:31:05,240
Speaker 6: for clarity before we act, we would be constantly behind.

627
00:31:05,920 --> 00:31:08,440
Speaker 2: One thing that does seem to be new, at least

628
00:31:08,560 --> 00:31:11,280
Speaker 2: in my lifetime, possibly not if you were alive in

629
00:31:11,320 --> 00:31:15,280
Speaker 2: the nineteen seventies, but political pressure on the FED. And

630
00:31:15,320 --> 00:31:18,760
Speaker 2: we've certainly seen some instances of that coming from President Trump,

631
00:31:18,840 --> 00:31:22,040
Speaker 2: who has not been shy about saying what he would

632
00:31:22,120 --> 00:31:24,280
Speaker 2: like to see in terms of interest rates. How are

633
00:31:24,280 --> 00:31:24,960
Speaker 2: you dealing with that?

634
00:31:26,200 --> 00:31:28,600
Speaker 6: We do have many periods in our history where there's

635
00:31:28,640 --> 00:31:32,080
Speaker 6: been pressure to move the interest rate, because of course

636
00:31:32,920 --> 00:31:36,680
Speaker 6: that would be part of the way the president or

637
00:31:36,760 --> 00:31:39,520
Speaker 6: the administration or Congress would like to see the FED go.

638
00:31:39,840 --> 00:31:42,880
Speaker 6: But that's why the FED is independent, because ultimately Congress

639
00:31:42,920 --> 00:31:46,960
Speaker 6: gave us the monetary policy responsibilities so that we could

640
00:31:47,000 --> 00:31:51,000
Speaker 6: make decisions that go past any particular administration that are

641
00:31:51,000 --> 00:31:55,480
Speaker 6: independent of political activities or political plans. So those are

642
00:31:55,600 --> 00:31:58,280
Speaker 6: good things about the FED. And ultimately, if you take

643
00:31:58,320 --> 00:32:00,640
Speaker 6: a job at the Federal Reserve, actually if you're in

644
00:32:00,720 --> 00:32:03,520
Speaker 6: leadership of the Federal Reserve, Federal Reserve Bank, president or

645
00:32:03,600 --> 00:32:08,040
Speaker 6: a governor, you have to almost like tap a stone

646
00:32:08,280 --> 00:32:10,880
Speaker 6: when you take the job. It's part of your oath

647
00:32:11,000 --> 00:32:15,160
Speaker 6: basically that you're going to make monetary policy that serves

648
00:32:15,240 --> 00:32:18,280
Speaker 6: all Americans and in a way that is not influenced

649
00:32:18,280 --> 00:32:21,240
Speaker 6: by political leanings one way or another. So I make

650
00:32:21,280 --> 00:32:25,320
Speaker 6: the same decisions using the same information, using the same

651
00:32:25,960 --> 00:32:29,240
Speaker 6: models and sources. Of course, the models and sources change

652
00:32:29,280 --> 00:32:31,640
Speaker 6: depending on the kind of condition we're in the economy.

653
00:32:31,800 --> 00:32:34,200
Speaker 6: But the process we talked about process a moment ago,

654
00:32:34,440 --> 00:32:39,800
Speaker 6: the process remains the same. Be curious, figure out as

655
00:32:39,880 --> 00:32:42,480
Speaker 6: much as you possibly can always learn, Then take a

656
00:32:42,520 --> 00:32:45,080
Speaker 6: decision that you think is right, that we collectively think

657
00:32:45,120 --> 00:32:48,280
Speaker 6: is right for the nation and the outlook, and then

658
00:32:48,480 --> 00:32:51,800
Speaker 6: have enough humility that you can't ask the question did

659
00:32:51,840 --> 00:32:53,840
Speaker 6: we make the right decision? And what more do we

660
00:32:53,880 --> 00:32:55,520
Speaker 6: need to learn to make a better one? And I

661
00:32:55,560 --> 00:32:59,400
Speaker 6: think that always works, and that's immune to political pressure

662
00:32:59,440 --> 00:33:02,160
Speaker 6: because ultimate I get up every day knowing that my

663
00:33:02,320 --> 00:33:06,480
Speaker 6: work serves Americans. That's who I work for, and that's

664
00:33:06,520 --> 00:33:06,920
Speaker 6: what we do.

665
00:33:07,520 --> 00:33:10,280
Speaker 3: You made this point about how like if you know,

666
00:33:10,280 --> 00:33:13,160
Speaker 3: if you wait for the clear evidence and maybe too late,

667
00:33:13,280 --> 00:33:16,080
Speaker 3: especially with the respect to the labor market, once it slips,

668
00:33:16,160 --> 00:33:20,400
Speaker 3: history says it tends to fall. Last week it was

669
00:33:20,440 --> 00:33:22,960
Speaker 3: the FED meeting where there was no rate move, and

670
00:33:22,960 --> 00:33:25,120
Speaker 3: then Friday we got a job support that was not

671
00:33:25,160 --> 00:33:29,800
Speaker 3: only disappointing significant revisions and revisions are a common thing.

672
00:33:30,040 --> 00:33:32,680
Speaker 3: But and Tracy's been writing a lot about this, and

673
00:33:32,680 --> 00:33:36,720
Speaker 3: we've done some episodes. Response rates to public surveys have

674
00:33:36,800 --> 00:33:39,280
Speaker 3: gone down. There are concerns about whether, you know, we

675
00:33:39,320 --> 00:33:41,480
Speaker 3: need a fresh jolt of investment. But these are the

676
00:33:41,520 --> 00:33:44,040
Speaker 3: main instruments, right that you are looking at when you're

677
00:33:44,160 --> 00:33:46,719
Speaker 3: piloting the planet, et cetera. Is this making it harder?

678
00:33:46,760 --> 00:33:46,880
Speaker 2: Like?

679
00:33:46,920 --> 00:33:49,400
Speaker 3: Do you have concerns about that the quality of your

680
00:33:49,480 --> 00:33:53,719
Speaker 3: visibility into the data is suboptimal? Right now?

681
00:33:53,800 --> 00:33:55,800
Speaker 6: You know, I'm going to put it slightly differently than

682
00:33:55,880 --> 00:33:58,600
Speaker 6: main instruments. I think they're key instruments. But we've been

683
00:33:58,600 --> 00:34:03,680
Speaker 6: broadening our portfolio of instruments for monitoring for really since

684
00:34:03,720 --> 00:34:07,080
Speaker 6: the GFC, since the Global Financial Crisis, because what you

685
00:34:07,200 --> 00:34:09,759
Speaker 6: learned in the Global Financial Crisis is you're not going

686
00:34:09,760 --> 00:34:12,440
Speaker 6: to get enough information just looking at these main series

687
00:34:12,520 --> 00:34:14,160
Speaker 6: to really know what's going on. Then we had to

688
00:34:14,200 --> 00:34:15,680
Speaker 6: do that, of course in the pandemic, and we got

689
00:34:15,680 --> 00:34:18,800
Speaker 6: all these real time series we were using open table

690
00:34:18,920 --> 00:34:21,799
Speaker 6: data traffic, yes, how many people were going out? Or

691
00:34:21,840 --> 00:34:25,640
Speaker 6: is it transit traffic, et cetera. So what I would

692
00:34:25,640 --> 00:34:28,400
Speaker 6: offer is this. There's two things that I think about.

693
00:34:29,000 --> 00:34:34,000
Speaker 6: We are revered have been revered across the globe for

694
00:34:34,040 --> 00:34:37,960
Speaker 6: our data collection, and our data continuity and our data integrity.

695
00:34:38,239 --> 00:34:43,040
Speaker 6: Those three things are important to any nation that's trying

696
00:34:43,080 --> 00:34:45,440
Speaker 6: to follow things, and not just the Federal Reserve, but

697
00:34:45,480 --> 00:34:49,200
Speaker 6: to policymakers across the board, including states and localities, to

698
00:34:49,360 --> 00:34:51,960
Speaker 6: businesses who need to know what does the economy look

699
00:34:52,000 --> 00:34:54,400
Speaker 6: like so they can put it into their sales projections,

700
00:34:54,440 --> 00:34:58,000
Speaker 6: and so making sure that we're investing enough in those

701
00:34:58,239 --> 00:35:01,600
Speaker 6: that information, making sure we know how important it is,

702
00:35:01,920 --> 00:35:05,080
Speaker 6: I think is an essential goal. On the other side,

703
00:35:05,920 --> 00:35:09,640
Speaker 6: I'm not simply relying on those pieces of information. And importantly,

704
00:35:09,680 --> 00:35:11,640
Speaker 6: since we're in a turning point right now, kind of

705
00:35:11,920 --> 00:35:14,440
Speaker 6: by a transition point, it feels like a turning point

706
00:35:14,480 --> 00:35:17,359
Speaker 6: where the economy is slowing, inflation's coming down because they're

707
00:35:17,360 --> 00:35:21,040
Speaker 6: restrictive interest rates, and we're trying to achieve that soft

708
00:35:21,160 --> 00:35:24,560
Speaker 6: landing that the data are always volatile. They're volatile on

709
00:35:24,680 --> 00:35:28,000
Speaker 6: any turning point. Whether we're turning from a downturn into

710
00:35:28,080 --> 00:35:31,000
Speaker 6: an expansion, you miss the job growth. When you come down,

711
00:35:31,040 --> 00:35:34,080
Speaker 6: you tend to miss the job loss or the net losses.

712
00:35:34,280 --> 00:35:37,359
Speaker 6: So that's something I'm always I'm familiar with. At this point,

713
00:35:37,360 --> 00:35:39,439
Speaker 6: I've been doing this for a while. I know that's

714
00:35:39,480 --> 00:35:42,240
Speaker 6: going to happen. The magnitude of the changes is pretty

715
00:35:42,440 --> 00:35:46,239
Speaker 6: severe on Friday from the week before. Is that survey response?

716
00:35:46,400 --> 00:35:49,480
Speaker 6: Is that seasonal adjustments because things are different, or is

717
00:35:49,520 --> 00:35:52,000
Speaker 6: that something else going on? I trust the BLS will

718
00:35:52,080 --> 00:35:55,839
Speaker 6: unpack that and give us some answer about that. But

719
00:35:55,920 --> 00:35:58,799
Speaker 6: you know, ultimately on the response rates. You know, I

720
00:35:58,880 --> 00:36:01,080
Speaker 6: say that when I ask people would you respond to

721
00:36:01,080 --> 00:36:04,920
Speaker 6: a public survey? They've lost a little confidence in public institutions,

722
00:36:05,360 --> 00:36:07,799
Speaker 6: maybe a lot of confidence in public institutions. And so

723
00:36:07,880 --> 00:36:11,440
Speaker 6: the real call to action here for me is it

724
00:36:11,520 --> 00:36:13,759
Speaker 6: is part you know, the Federal Reserve is not all

725
00:36:13,760 --> 00:36:16,960
Speaker 6: public institutions, But we should do our part to demonstrate

726
00:36:16,960 --> 00:36:18,799
Speaker 6: to people and to talk to people. Go to the

727
00:36:18,800 --> 00:36:21,360
Speaker 6: critics and say what is it that you're not trusting,

728
00:36:21,640 --> 00:36:23,440
Speaker 6: and then tell our story.

729
00:36:23,840 --> 00:36:24,759
Speaker 5: Maybe they have.

730
00:36:24,800 --> 00:36:26,320
Speaker 6: Things that they are going to bring that we should

731
00:36:26,320 --> 00:36:30,440
Speaker 6: listen to and basically lean into this idea that we

732
00:36:30,560 --> 00:36:33,120
Speaker 6: do this work for them and that we want them

733
00:36:33,160 --> 00:36:34,840
Speaker 6: to trust that we're doing it for them.

734
00:36:35,360 --> 00:36:37,480
Speaker 2: Can you talk a little bit more about the alternative

735
00:36:37,520 --> 00:36:38,600
Speaker 2: data sources that.

736
00:36:38,560 --> 00:36:39,440
Speaker 4: Are available to you.

737
00:36:39,440 --> 00:36:41,719
Speaker 2: Because I hear this a lot, This idea that okay, well,

738
00:36:41,840 --> 00:36:44,880
Speaker 2: payrolls seems to have a revision problem at the moment.

739
00:36:45,000 --> 00:36:47,440
Speaker 2: Maybe there are other indicators we could look at, or

740
00:36:47,840 --> 00:36:51,400
Speaker 2: if a larger chunk of CPI prices are being imputed

741
00:36:51,480 --> 00:36:54,399
Speaker 2: or estimated then they were previously. Maybe there's something else

742
00:36:54,440 --> 00:36:57,120
Speaker 2: we can look at. What exactly are these data sources?

743
00:36:57,160 --> 00:36:59,319
Speaker 2: It's like, what is most valuable to you right now?

744
00:36:59,360 --> 00:37:02,040
Speaker 6: So there's private collective data. We talked about foot traffic

745
00:37:02,080 --> 00:37:04,960
Speaker 6: and things. But there's the ADP employment data. You can

746
00:37:05,000 --> 00:37:07,759
Speaker 6: think about that, there's the prices project. You can look

747
00:37:07,800 --> 00:37:10,880
Speaker 6: at those data. Importantly, though, I think it's not just

748
00:37:11,120 --> 00:37:15,040
Speaker 6: getting other sources of data, it's learning. So say that

749
00:37:15,040 --> 00:37:17,600
Speaker 6: a lot of the CPI prices are imputed, then we

750
00:37:17,680 --> 00:37:21,000
Speaker 6: need to bring our best statistical minds to think about

751
00:37:21,160 --> 00:37:23,360
Speaker 6: if I take the ones that aren't imputed and I

752
00:37:23,400 --> 00:37:26,640
Speaker 6: look at how correlated they are with underlying inflation over time,

753
00:37:26,840 --> 00:37:27,560
Speaker 6: what do I learn?

754
00:37:27,719 --> 00:37:28,640
Speaker 5: Are they a good signal?

755
00:37:28,800 --> 00:37:31,080
Speaker 4: Is there a messaging challenge here? Though?

756
00:37:31,120 --> 00:37:33,760
Speaker 2: If I think people are very used to at this point,

757
00:37:33,800 --> 00:37:36,320
Speaker 2: the idea of the FED sees the non farm payrolls

758
00:37:36,480 --> 00:37:41,600
Speaker 2: number a FED sees CFPI obviously isn't your preferred inflation measure,

759
00:37:41,760 --> 00:37:46,000
Speaker 2: but PCE or whatever. If you're looking at other things,

760
00:37:46,280 --> 00:37:48,719
Speaker 2: or maybe if you're at turning points in the economy,

761
00:37:48,800 --> 00:37:52,560
Speaker 2: and so other indicators become more important at that particular

762
00:37:52,600 --> 00:37:55,920
Speaker 2: amount of time. How do you communicate how you're factoring

763
00:37:55,960 --> 00:37:59,120
Speaker 2: in that data into your monetary policy decisions, because not

764
00:37:59,160 --> 00:38:00,919
Speaker 2: everyone is going to be looking at the same things

765
00:38:00,920 --> 00:38:01,200
Speaker 2: as you.

766
00:38:01,840 --> 00:38:04,080
Speaker 6: We talk about what we do, and part of talking

767
00:38:04,080 --> 00:38:08,080
Speaker 6: about what we do is to say we have history

768
00:38:08,200 --> 00:38:10,719
Speaker 6: and models that tell us a little bit about how

769
00:38:10,719 --> 00:38:13,640
Speaker 6: the economy works. We have the incoming information, and we

770
00:38:13,719 --> 00:38:15,920
Speaker 6: have all the periods of time when the information has

771
00:38:15,960 --> 00:38:19,759
Speaker 6: been volatile, and we can understand the underlying trends. And

772
00:38:19,800 --> 00:38:22,839
Speaker 6: then we have the people we talk to. And what

773
00:38:22,880 --> 00:38:25,640
Speaker 6: was interesting about the jobs report on Friday is it

774
00:38:25,719 --> 00:38:28,480
Speaker 6: better matched in the direction of change, not in the magnitude.

775
00:38:28,520 --> 00:38:31,160
Speaker 6: It better matched what I've been hearing. And so a

776
00:38:31,200 --> 00:38:34,799
Speaker 6: disciplining device for data that you don't know if they're

777
00:38:34,800 --> 00:38:36,760
Speaker 6: really accurate.

778
00:38:36,800 --> 00:38:37,920
Speaker 5: Is what you hear from people.

779
00:38:37,960 --> 00:38:40,759
Speaker 6: Because people do not tell you I feel really really

780
00:38:40,800 --> 00:38:43,239
Speaker 6: comfortable getting a job only to find out that the

781
00:38:43,320 --> 00:38:46,560
Speaker 6: job market report is bad. What they will tell you is, boy,

782
00:38:46,600 --> 00:38:49,839
Speaker 6: it looks really worrisome out there. And then you get

783
00:38:49,840 --> 00:38:52,640
Speaker 6: a jobs report that doesn't look like the rapid job

784
00:38:52,680 --> 00:38:54,239
Speaker 6: growth that was the thing that was out of whack,

785
00:38:54,600 --> 00:38:57,200
Speaker 6: the rapid job growth from the month before. Is what

786
00:38:57,400 --> 00:38:59,839
Speaker 6: I said, Well, really, that's not what I'm hearing. What's

787
00:38:59,840 --> 00:39:01,920
Speaker 6: the gap? And we spent a lot of time digging

788
00:39:01,960 --> 00:39:05,000
Speaker 6: in and unpacking that. But then when the jobs market

789
00:39:05,000 --> 00:39:07,839
Speaker 6: report got revised, I was like, Okay, that makes more sense.

790
00:39:07,880 --> 00:39:10,759
Speaker 6: Even if the direction I mean, even if the magnitude

791
00:39:10,880 --> 00:39:14,560
Speaker 6: is vastly different than anything I probably think will go forward,

792
00:39:14,760 --> 00:39:16,640
Speaker 6: I think the direction of change is accurate.

793
00:39:17,040 --> 00:39:20,480
Speaker 3: Okay, So there's this slowing and as you indicated, some

794
00:39:21,120 --> 00:39:26,120
Speaker 3: number who knows rate cuts are probably coming in the future. Obviously,

795
00:39:26,520 --> 00:39:29,880
Speaker 3: there are businesses when you read them in the ism surveys,

796
00:39:30,120 --> 00:39:32,640
Speaker 3: like we need rate relief. There are people who want

797
00:39:32,640 --> 00:39:35,640
Speaker 3: to buy house, we want rate relief. President Trump, obviously,

798
00:39:35,920 --> 00:39:37,799
Speaker 3: maybe in part due to interest payments on the debt,

799
00:39:37,800 --> 00:39:41,120
Speaker 3: wants to see lower rates. That being said, even as

800
00:39:41,160 --> 00:39:43,640
Speaker 3: the market's priced in some cuts in the near term future,

801
00:39:43,800 --> 00:39:47,280
Speaker 3: there's been this significant steepening of the old curve. Long

802
00:39:47,360 --> 00:39:49,640
Speaker 3: end rates haven't come down that much, so it's not

803
00:39:49,680 --> 00:39:52,000
Speaker 3: obvious to me that even if you delivered cuts that

804
00:39:52,120 --> 00:39:55,480
Speaker 3: all these homeowners or businesses or the president would get

805
00:39:55,480 --> 00:39:58,840
Speaker 3: the type of rate relief that they actually want. I'm curious,

806
00:39:59,280 --> 00:40:02,839
Speaker 3: what would it take in your view to get meaningful

807
00:40:03,320 --> 00:40:05,560
Speaker 3: change at the long end of the curve, which is

808
00:40:06,000 --> 00:40:08,239
Speaker 3: where a lot of where there's a lot of sensitivity.

809
00:40:08,920 --> 00:40:11,200
Speaker 6: I love that question because I think it's hard to

810
00:40:11,360 --> 00:40:13,920
Speaker 6: remind people on a regular basis that we are not

811
00:40:14,000 --> 00:40:15,960
Speaker 6: the only game in town at the Federal Reserve. We

812
00:40:16,040 --> 00:40:19,120
Speaker 6: don't control We're not yield curve targeters, so we're not

813
00:40:19,160 --> 00:40:21,640
Speaker 6: controlling all the things that would move the yield curve.

814
00:40:21,840 --> 00:40:23,719
Speaker 6: What moves the long end of the yield curve is

815
00:40:23,760 --> 00:40:28,320
Speaker 6: course fed policy, inflation expectations. Those have been well anchored,

816
00:40:28,320 --> 00:40:32,719
Speaker 6: so I don't think that's driving them. Geopolitical risks, how

817
00:40:32,760 --> 00:40:35,680
Speaker 6: we're viewed as a trading country or a reserve currency,

818
00:40:35,840 --> 00:40:39,440
Speaker 6: what our debt looks like going forward in projections, and

819
00:40:39,480 --> 00:40:41,640
Speaker 6: how we think we're going to manage all of that together.

820
00:40:41,760 --> 00:40:44,120
Speaker 6: Right So, right now, it looks like the markets are

821
00:40:44,200 --> 00:40:47,000
Speaker 6: just reacting to all of the risk. We have rising debt,

822
00:40:47,080 --> 00:40:50,520
Speaker 6: we have geopolitical risk, we're not sure how our trading

823
00:40:50,520 --> 00:40:53,400
Speaker 6: partners like us right now, and then all of this

824
00:40:53,480 --> 00:40:57,040
Speaker 6: could be burdensome and mostly can push up the real

825
00:40:57,120 --> 00:40:59,719
Speaker 6: rate of interest over time, right the natural rate of

826
00:40:59,719 --> 00:41:01,320
Speaker 6: interest or the neutral rate of interest.

827
00:41:01,320 --> 00:41:02,359
Speaker 5: And so you're seeing.

828
00:41:02,080 --> 00:41:06,279
Speaker 6: That, and ultimately the Fed can adjust policy in the

829
00:41:06,320 --> 00:41:09,520
Speaker 6: short end in a way that's meant to balance the goals.

830
00:41:09,680 --> 00:41:12,600
Speaker 6: But we can't control all the aspects of the yield curve.

831
00:41:13,080 --> 00:41:16,239
Speaker 3: I know, because I've heard German Powell and others say

832
00:41:16,239 --> 00:41:18,600
Speaker 3: a million times, we don't comment on fiscal policy. That's

833
00:41:18,600 --> 00:41:22,840
Speaker 3: not our business. Nonetheless, I'm right, Yeah, But when you

834
00:41:23,000 --> 00:41:25,880
Speaker 3: describe those various factors that push the long end up

835
00:41:25,960 --> 00:41:28,919
Speaker 3: or keep it elevated, could it be that it will

836
00:41:28,920 --> 00:41:31,640
Speaker 3: be hard to get those back down to more desirable

837
00:41:31,719 --> 00:41:35,799
Speaker 3: levels without some more substantial fiscal consolidation.

838
00:41:36,360 --> 00:41:40,160
Speaker 5: Well, let me say this. Let me say this, Yeah,

839
00:41:40,239 --> 00:41:40,719
Speaker 5: let me say this.

840
00:41:41,239 --> 00:41:44,520
Speaker 6: We were having these conversations about the rising neutral rate

841
00:41:44,560 --> 00:41:49,600
Speaker 6: of interest before the election, before the administration changed, and

842
00:41:49,640 --> 00:41:52,520
Speaker 6: so I think we should look to what are the

843
00:41:52,680 --> 00:41:56,280
Speaker 6: fundamental factors in our economy that are changing the neutral

844
00:41:56,320 --> 00:41:58,160
Speaker 6: rate of interest, not just in the US, but in

845
00:41:58,200 --> 00:42:02,360
Speaker 6: the globe. This is the interest rates are not set nationally.

846
00:42:02,560 --> 00:42:05,600
Speaker 6: I mean we've said interest rates nationally, but interest rates

847
00:42:05,600 --> 00:42:08,960
Speaker 6: are global. If you remember, prior to the pandemic interest

848
00:42:09,040 --> 00:42:11,480
Speaker 6: rates and after the GFC interest rates, the real rate

849
00:42:11,520 --> 00:42:15,520
Speaker 6: of interest was just falling. Inflation was below most countries targets,

850
00:42:15,760 --> 00:42:19,760
Speaker 6: and it was the sluggish growth. Inflation expectations are falling.

851
00:42:19,960 --> 00:42:22,560
Speaker 6: How were we going to manage this stagnation is going

852
00:42:22,600 --> 00:42:26,520
Speaker 6: to come from this secular stagnation? Then, of course inflation

853
00:42:26,680 --> 00:42:29,640
Speaker 6: rises in almost every country, and we're talking about the

854
00:42:29,760 --> 00:42:32,319
Speaker 6: real interest rate going up, not down. And so we're

855
00:42:32,560 --> 00:42:34,920
Speaker 6: looking at a place where it settles now at the

856
00:42:35,040 --> 00:42:40,320
Speaker 6: neutral rate in nominal terms, settling around three or higher,

857
00:42:40,600 --> 00:42:43,440
Speaker 6: not at t zero point five. So that's a pretty

858
00:42:43,480 --> 00:42:46,160
Speaker 6: big increase in the rate of interest, the neutral rate

859
00:42:46,200 --> 00:42:48,920
Speaker 6: of interest, and frankly, the direction seems to be pushing

860
00:42:48,920 --> 00:42:50,839
Speaker 6: it up, not pulling it down. And I think that's

861
00:42:50,880 --> 00:42:53,360
Speaker 6: where I try to explain to people the most, is

862
00:42:53,400 --> 00:42:56,520
Speaker 6: that interest rate cuts. If you think we're going back

863
00:42:56,560 --> 00:43:01,840
Speaker 6: to pre pandemic levels of interest rates that we're considered neutral,

864
00:43:02,160 --> 00:43:05,040
Speaker 6: I don't think that's likely to happen, and that's commercial

865
00:43:05,040 --> 00:43:07,600
Speaker 6: real estate. Folks are really attuned to this, and they

866
00:43:07,680 --> 00:43:10,319
Speaker 6: knew that a year and a half ago. Markets are

867
00:43:10,480 --> 00:43:13,000
Speaker 6: knew that a year ago. But I think we're still

868
00:43:13,040 --> 00:43:17,480
Speaker 6: working on businesses and consumers to recognize those were not

869
00:43:17,760 --> 00:43:19,840
Speaker 6: those are not days we're likely to return to, at

870
00:43:19,920 --> 00:43:21,080
Speaker 6: least in the near term.

871
00:43:22,120 --> 00:43:24,320
Speaker 2: You've said that you think the time for rate cuts

872
00:43:24,360 --> 00:43:27,480
Speaker 2: is nevertheless coming, and I take the point that maybe

873
00:43:27,719 --> 00:43:29,840
Speaker 2: rates aren't going back to where they were pre pandemic,

874
00:43:29,880 --> 00:43:32,360
Speaker 2: but like, certainly we are talking about cuts, market is

875
00:43:32,400 --> 00:43:36,319
Speaker 2: expecting cuts. What are you waiting to see before you

876
00:43:36,400 --> 00:43:39,719
Speaker 2: get absolute certainty that actually this is the moment where

877
00:43:39,719 --> 00:43:40,680
Speaker 2: we need to act.

878
00:43:41,000 --> 00:43:44,719
Speaker 6: Well, I'm really not waiting to see anything as much

879
00:43:44,760 --> 00:43:48,799
Speaker 6: as I'm looking to collect the information that shows that

880
00:43:48,880 --> 00:43:51,920
Speaker 6: what I believe is happening is happening. So it's not

881
00:43:52,000 --> 00:43:53,680
Speaker 6: like I'm waiting to see something and I'm going to

882
00:43:53,719 --> 00:43:56,480
Speaker 6: go aha, it worked. I mean, it's happening. We've got

883
00:43:56,520 --> 00:44:00,480
Speaker 6: to get on it. It's really about we just keep confirming, Yeah,

884
00:44:00,520 --> 00:44:03,040
Speaker 6: the confirmation the evidence. So let's take the labor market

885
00:44:03,040 --> 00:44:06,200
Speaker 6: for example. So in advance of the July meeting. We

886
00:44:06,280 --> 00:44:07,719
Speaker 6: do this all the time, but you know, since we

887
00:44:07,880 --> 00:44:10,040
Speaker 6: just had the July meeting, let's talk about it. So

888
00:44:10,280 --> 00:44:12,799
Speaker 6: in advance of the July meeting, we were hearing we

889
00:44:12,840 --> 00:44:15,440
Speaker 6: think the labor market softening. So I'm asking the question,

890
00:44:15,680 --> 00:44:16,440
Speaker 6: isn't weakening.

891
00:44:17,280 --> 00:44:19,120
Speaker 5: No, softening is what we do expect.

892
00:44:19,200 --> 00:44:23,200
Speaker 6: Weakening is a different signal. So you take the entire

893
00:44:23,320 --> 00:44:26,720
Speaker 6: dashboard of labor market indicators and you ask what's happening

894
00:44:26,760 --> 00:44:29,720
Speaker 6: to the ones that lead? Initial claims for unemployment insurance

895
00:44:29,760 --> 00:44:32,720
Speaker 6: are leading indicator. They predict where the labor market's heading.

896
00:44:33,080 --> 00:44:35,400
Speaker 6: They've been stable. You unpack and you look at all

897
00:44:35,440 --> 00:44:37,799
Speaker 6: the states you get their initial claims data. There's really

898
00:44:37,800 --> 00:44:40,080
Speaker 6: no red flag states. There's only two that are showing

899
00:44:40,120 --> 00:44:44,600
Speaker 6: a lot of pickup DC An Area and Michigan. Those

900
00:44:44,600 --> 00:44:47,560
Speaker 6: are the two places. Otherwise most of them look pretty stable.

901
00:44:48,239 --> 00:44:52,400
Speaker 6: You think about, okay, what about job finding rates not

902
00:44:52,600 --> 00:44:55,920
Speaker 6: just an aggregate, but by duration of unemployment. When the

903
00:44:56,000 --> 00:44:59,160
Speaker 6: labor market's really weakening, people push out in duration it's

904
00:44:59,160 --> 00:45:01,120
Speaker 6: harder to find a job. But then you see those

905
00:45:01,200 --> 00:45:04,640
Speaker 6: job finding rates really decline for out durations. You're not

906
00:45:04,680 --> 00:45:08,120
Speaker 6: seeing that, So those are wage growth isn't stumbling. You're

907
00:45:08,160 --> 00:45:10,880
Speaker 6: just not seeing those things. And so for me it

908
00:45:10,960 --> 00:45:13,520
Speaker 6: was about, Okay, we're seeing a signal that this might

909
00:45:13,600 --> 00:45:16,480
Speaker 6: be softening to weakening, but we don't know yet. So

910
00:45:16,600 --> 00:45:19,799
Speaker 6: then you go back, leave the interest rate where it

911
00:45:19,840 --> 00:45:22,840
Speaker 6: is because inflation is still printing above target, and you

912
00:45:22,920 --> 00:45:25,520
Speaker 6: have some more time. But the first labor market report

913
00:45:25,560 --> 00:45:28,239
Speaker 6: we get has a bit of a tick up in unemployment,

914
00:45:28,520 --> 00:45:30,480
Speaker 6: and you get those jobs numbers. I will say, maybe

915
00:45:30,480 --> 00:45:32,239
Speaker 6: because your listeners will be interested in it. It's not

916
00:45:32,280 --> 00:45:34,560
Speaker 6: a good time to look at levels. It's really not

917
00:45:34,600 --> 00:45:36,880
Speaker 6: a good time to look at employment rate. I mean,

918
00:45:37,120 --> 00:45:40,440
Speaker 6: you know, I'm not employment rates, employment level, like how

919
00:45:40,480 --> 00:45:42,400
Speaker 6: much job growth do we have because we've had this

920
00:45:42,880 --> 00:45:46,160
Speaker 6: very wellharsh swing in how many immigrants are in the

921
00:45:46,200 --> 00:45:48,720
Speaker 6: labor force. The labor force went from people would estimated

922
00:45:48,800 --> 00:45:51,520
Speaker 6: when fifty is the trend growth we need to have.

923
00:45:51,600 --> 00:45:53,840
Speaker 6: So the unemployment doesn't rise now it's in the seventies,

924
00:45:53,840 --> 00:45:54,719
Speaker 6: maybe the sixties.

925
00:45:54,960 --> 00:45:57,319
Speaker 5: That's a big change. So I look at rates, unemployment rate,

926
00:45:57,400 --> 00:45:58,719
Speaker 5: job finding rate, quit rate.

927
00:45:59,080 --> 00:46:00,960
Speaker 2: Although this is what all said as well, like look

928
00:46:00,960 --> 00:46:01,840
Speaker 2: at the unemployment rate.

929
00:46:01,920 --> 00:46:04,440
Speaker 6: Yeah, look at you look at rates and the unemployment

930
00:46:04,520 --> 00:46:05,840
Speaker 6: rate is a good thing to look at, but it

931
00:46:05,880 --> 00:46:08,799
Speaker 6: will lag deterioration in the labor markets. So you have

932
00:46:08,840 --> 00:46:10,400
Speaker 6: to look at those other ones as well. So I

933
00:46:10,480 --> 00:46:12,880
Speaker 6: look at initial claims for unemployment insurance because people have

934
00:46:12,880 --> 00:46:14,000
Speaker 6: to go in FIO, it's a.

935
00:46:13,920 --> 00:46:15,040
Speaker 5: Good administrative record.

936
00:46:15,239 --> 00:46:17,520
Speaker 6: And then I look at quits rates, job finding rates,

937
00:46:17,760 --> 00:46:20,520
Speaker 6: those types of things, and there I didn't see signs

938
00:46:20,520 --> 00:46:24,400
Speaker 6: of weakness, but you can't wait forever. And at this point,

939
00:46:24,600 --> 00:46:26,960
Speaker 6: the piece of information I'm also getting is that there

940
00:46:27,000 --> 00:46:31,600
Speaker 6: are very few signs that inflation tariff based inflation in

941
00:46:31,640 --> 00:46:33,960
Speaker 6: the good sector is spilling over to the other sectors,

942
00:46:34,320 --> 00:46:38,440
Speaker 6: and inflation expectations are stable at the medium a longer end.

943
00:46:39,239 --> 00:46:42,080
Speaker 6: There's not much of a case for persistence at that point.

944
00:46:42,320 --> 00:46:43,719
Speaker 6: So then you think, well, if we really want to

945
00:46:43,719 --> 00:46:46,000
Speaker 6: get the soft landing and give people what they deserve,

946
00:46:46,040 --> 00:46:50,920
Speaker 6: which is lower inflation, two percent price stability inflation, and

947
00:46:51,120 --> 00:46:54,560
Speaker 6: a labor market that still sustainably works, well we've got

948
00:46:54,600 --> 00:46:56,120
Speaker 6: to start recalibrating policy.

949
00:46:56,760 --> 00:46:58,640
Speaker 3: You just like a really stupid question. I feel like

950
00:46:58,640 --> 00:47:01,080
Speaker 3: that's one of these things I should or have researched

951
00:47:01,120 --> 00:47:04,799
Speaker 3: before I came. But is there much sensitivity here in

952
00:47:04,840 --> 00:47:08,560
Speaker 3: Alaska to the changes in immigration policy. Do you hear

953
00:47:08,600 --> 00:47:10,680
Speaker 3: that from business? Yes, well, like what I don't I

954
00:47:11,120 --> 00:47:13,200
Speaker 3: actually realized I don't know anything about like the role

955
00:47:13,239 --> 00:47:14,600
Speaker 3: of immigrant labor wales.

956
00:47:14,640 --> 00:47:17,799
Speaker 6: So you hear this a lot in all communities. But

957
00:47:18,360 --> 00:47:21,720
Speaker 6: so far people have said, it's not really biting us.

958
00:47:22,160 --> 00:47:24,680
Speaker 6: And the reason is, and they use that term biting us,

959
00:47:24,719 --> 00:47:27,160
Speaker 6: and here's what's the reason. So then you ask, why

960
00:47:27,480 --> 00:47:29,439
Speaker 6: did you use a lot of immigrant labor. Why isn't

961
00:47:29,480 --> 00:47:32,520
Speaker 6: it biting And it's because labor demand is slowing, So

962
00:47:32,520 --> 00:47:35,879
Speaker 6: we're losing members of the labor force at the same

963
00:47:35,880 --> 00:47:38,279
Speaker 6: time labor demand is slowing, which is I would offer

964
00:47:38,320 --> 00:47:40,400
Speaker 6: one of the reasons we're still seeing the balance in

965
00:47:40,440 --> 00:47:43,680
Speaker 6: the labor market that we have because those workers are

966
00:47:43,719 --> 00:47:46,800
Speaker 6: not coming or they're leaving, and then the domestic labor

967
00:47:46,840 --> 00:47:50,000
Speaker 6: supply is consistent with the labor demand that's out there.

968
00:47:50,040 --> 00:47:52,440
Speaker 6: But firms tell me on a regular basis that if

969
00:47:52,440 --> 00:47:55,080
Speaker 6: they were growing like they were a year ago, they

970
00:47:55,080 --> 00:47:56,040
Speaker 6: would have a shortage.

971
00:47:57,800 --> 00:47:59,960
Speaker 2: One thing I've been thinking about a lot recently is

972
00:48:00,440 --> 00:48:04,480
Speaker 2: the idea of whether or not starting points kind of matters.

973
00:48:04,560 --> 00:48:07,439
Speaker 2: So for the past few years, One of the big

974
00:48:07,480 --> 00:48:10,000
Speaker 2: things that's happened is the US economy has surprised to

975
00:48:10,040 --> 00:48:13,000
Speaker 2: the upside over and over again, and US exceptionalism has

976
00:48:13,080 --> 00:48:16,040
Speaker 2: really been the theme. And so I'm curious if those

977
00:48:16,160 --> 00:48:20,800
Speaker 2: years of unexpected growth, if that gives you more wriggle

978
00:48:20,880 --> 00:48:26,000
Speaker 2: room or more runway perhaps in terms of having to cut.

979
00:48:26,160 --> 00:48:27,399
Speaker 4: Do you feel like.

980
00:48:27,320 --> 00:48:30,040
Speaker 2: The starting point matters, if you were starting lower, would

981
00:48:30,080 --> 00:48:31,320
Speaker 2: you be in more of a hurry.

982
00:48:32,480 --> 00:48:33,440
Speaker 5: That's a really good question.

983
00:48:33,480 --> 00:48:36,000
Speaker 6: So let me let me think through, let me walk

984
00:48:36,040 --> 00:48:37,880
Speaker 6: through health, take your time think about it. I'll just

985
00:48:37,920 --> 00:48:40,759
Speaker 6: walk through how I think about it. So, yes, you

986
00:48:40,840 --> 00:48:44,200
Speaker 6: have to take contextualization around it. Right, you know, where

987
00:48:44,200 --> 00:48:46,680
Speaker 6: you start matters, But right now I don't think we're

988
00:48:46,760 --> 00:48:49,719
Speaker 6: in that place where it's actually is relevant.

989
00:48:50,040 --> 00:48:50,640
Speaker 5: Here's why.

990
00:48:51,400 --> 00:48:53,760
Speaker 6: Two years ago, if we had a hot labor market

991
00:48:53,840 --> 00:48:57,080
Speaker 6: and tims it was even frothy, and inflation's printing it,

992
00:48:57,320 --> 00:48:59,680
Speaker 6: you know, five percent, well then that's a very different

993
00:48:59,680 --> 00:49:02,360
Speaker 6: acomy in terms of where we are than today. But

994
00:49:02,520 --> 00:49:05,360
Speaker 6: right now we have an economy that's really resilient. It

995
00:49:05,400 --> 00:49:09,360
Speaker 6: has proven its resiliency, but we're also very close to

996
00:49:10,120 --> 00:49:14,360
Speaker 6: getting to a point of maximum employment and price stability.

997
00:49:14,480 --> 00:49:16,600
Speaker 6: So then if you have shocks to the economy and

998
00:49:16,600 --> 00:49:19,240
Speaker 6: you're in this balance, well then and you've got interest

999
00:49:19,280 --> 00:49:22,040
Speaker 6: rates that are restrictive, you end up be more vulnerable.

1000
00:49:22,400 --> 00:49:27,360
Speaker 6: So it is true that the economy has outperformed everyone's

1001
00:49:27,400 --> 00:49:30,800
Speaker 6: expectations over the past several years. That's just a fact,

1002
00:49:31,040 --> 00:49:33,520
Speaker 6: and I think that modes well for the momentum and

1003
00:49:33,560 --> 00:49:38,719
Speaker 6: the resilience of our economy collectively to weather shocks. But

1004
00:49:39,040 --> 00:49:42,120
Speaker 6: now as we get the labor markets in balance, we're

1005
00:49:42,120 --> 00:49:44,920
Speaker 6: starting to see some softening, We're starting to see some sentiment.

1006
00:49:45,200 --> 00:49:48,000
Speaker 6: We have been seeing sentiment come down, and then on

1007
00:49:48,040 --> 00:49:50,160
Speaker 6: top of it, inflation's close to our target and interest

1008
00:49:50,239 --> 00:49:53,520
Speaker 6: rates are still restrictive. That leaves us more vulnerable. Think

1009
00:49:53,560 --> 00:49:57,160
Speaker 6: back to twenty nineteen. Twenty nineteen, we cut rates twice,

1010
00:49:57,360 --> 00:49:59,040
Speaker 6: and we did that in part because we had all

1011
00:49:59,080 --> 00:50:01,680
Speaker 6: these headwinds coming from overseas, so we weren't in a

1012
00:50:01,680 --> 00:50:06,080
Speaker 6: precarious place, but we were accommodating to the headwinds. We

1013
00:50:06,080 --> 00:50:08,799
Speaker 6: were trying to support the economy against those headwinds to

1014
00:50:08,920 --> 00:50:11,920
Speaker 6: ensure we didn't tip over. I see today as very similar.

1015
00:50:12,120 --> 00:50:14,640
Speaker 6: The only difference and the supportant difference it's a very

1016
00:50:14,640 --> 00:50:19,120
Speaker 6: important difference. Inflation's not one point eight. Inflation is higher

1017
00:50:19,400 --> 00:50:23,560
Speaker 6: and expected to go higher, at least temporarily on the

1018
00:50:23,600 --> 00:50:26,840
Speaker 6: basis of tariffs, and so it's always more challenging and

1019
00:50:26,880 --> 00:50:30,560
Speaker 6: this will be a communications challenge. If we are lowering

1020
00:50:30,560 --> 00:50:33,359
Speaker 6: the interest rate in the face of rising inflation, then

1021
00:50:33,560 --> 00:50:36,799
Speaker 6: the burden is on us to explain that we're not

1022
00:50:36,840 --> 00:50:40,600
Speaker 6: seeing persistence and to offer what is true that if

1023
00:50:40,640 --> 00:50:44,359
Speaker 6: it turns out to be persistence built, we will turn

1024
00:50:44,400 --> 00:50:45,839
Speaker 6: around and raise the interest rate.

1025
00:50:46,120 --> 00:50:49,320
Speaker 2: I do notice that everyone's talking about short term price pressures,

1026
00:50:49,320 --> 00:50:51,800
Speaker 2: but no one's using the term transitory anymore.

1027
00:50:52,160 --> 00:50:54,120
Speaker 4: Is that what word?

1028
00:50:54,160 --> 00:51:01,919
Speaker 6: I don't even know what you're talking about.

1029
00:51:12,360 --> 00:51:15,160
Speaker 3: Going back to the spring, as you said, it sort

1030
00:51:15,200 --> 00:51:18,319
Speaker 3: of looks like the tariffs aren't creating spillover. But there

1031
00:51:18,360 --> 00:51:20,279
Speaker 3: was this idea that it's not just the tariffs per se,

1032
00:51:20,400 --> 00:51:23,439
Speaker 3: and the question of whether tariffs would be an inflationary driver,

1033
00:51:23,640 --> 00:51:26,239
Speaker 3: but also just like policy volatility, the sort of like

1034
00:51:26,600 --> 00:51:29,960
Speaker 3: the second derivative of tariffs, et cetera. And I don't know.

1035
00:51:30,040 --> 00:51:31,600
Speaker 3: I'm just going to stay in my opinion. I don't

1036
00:51:31,600 --> 00:51:34,640
Speaker 3: think we will ever have something under this administration of

1037
00:51:34,719 --> 00:51:36,840
Speaker 3: tariff certainty. You know, I think these are going to

1038
00:51:36,880 --> 00:51:39,200
Speaker 3: be moving numbers for a long time. That's just my

1039
00:51:39,320 --> 00:51:41,640
Speaker 3: personal opinion. But on the other hand, it does feel

1040
00:51:41,680 --> 00:51:45,040
Speaker 3: like the range of possible outcomes has narrowed. We've gotten deals,

1041
00:51:45,080 --> 00:51:47,200
Speaker 3: and you know, it feels like the range of possible

1042
00:51:47,239 --> 00:51:50,600
Speaker 3: outcomes is less wide than it was in April. Has

1043
00:51:50,640 --> 00:51:52,680
Speaker 3: it been a factor in you're thinking, you know, okay,

1044
00:51:52,760 --> 00:51:55,440
Speaker 3: tariffs aren't going to happen, But does it feel to

1045
00:51:55,480 --> 00:51:57,799
Speaker 3: you like we have more certainty over what the trade

1046
00:51:57,840 --> 00:52:01,120
Speaker 3: picture will look like today than we had an early Absolutely.

1047
00:52:01,239 --> 00:52:03,920
Speaker 6: I think when the tariff announcements on Liberation Day were

1048
00:52:04,000 --> 00:52:07,640
Speaker 6: very high. It wasn't clear that countries wouldn't reciprocate in

1049
00:52:07,760 --> 00:52:11,040
Speaker 6: tariff us, or that they would and no retaliation, that

1050
00:52:11,040 --> 00:52:13,440
Speaker 6: they wouldn't, that they wouldn't actually that they would go

1051
00:52:13,560 --> 00:52:16,560
Speaker 6: to the negotiating table, and so all of that's happened,

1052
00:52:16,800 --> 00:52:18,680
Speaker 6: and then on top of it, it wasn't clear how

1053
00:52:18,800 --> 00:52:21,840
Speaker 6: firms would respond, would reforms just sit on the sidelines

1054
00:52:21,840 --> 00:52:23,600
Speaker 6: and wait for it all to be over, or would

1055
00:52:23,600 --> 00:52:27,200
Speaker 6: they continue to participate in their economy and their growth.

1056
00:52:27,239 --> 00:52:29,600
Speaker 6: And so there was this period for the first three

1057
00:52:29,719 --> 00:52:33,239
Speaker 6: or four weeks after the original announcement, where firms are like,

1058
00:52:33,320 --> 00:52:35,359
Speaker 6: I got to wait because I don't know. And in fact,

1059
00:52:35,360 --> 00:52:38,520
Speaker 6: to some firms were not even bringing the ships at sail.

1060
00:52:38,560 --> 00:52:40,800
Speaker 6: They were already outside the port. They weren't taking delivery

1061
00:52:40,800 --> 00:52:42,760
Speaker 6: on the goods because they wanted to wait and see.

1062
00:52:42,960 --> 00:52:46,440
Speaker 6: But now one of my contacts said, uncertainty is the

1063
00:52:46,480 --> 00:52:49,960
Speaker 6: new normal. We expect uncertainty for the next four years

1064
00:52:50,239 --> 00:52:52,440
Speaker 6: and three and a half years, and so we're just

1065
00:52:52,560 --> 00:52:54,359
Speaker 6: going to live with it.

1066
00:52:54,680 --> 00:52:57,160
Speaker 5: And when you live with it, you don't.

1067
00:52:56,880 --> 00:52:59,080
Speaker 6: Change the fact that you want to grow and you

1068
00:52:59,120 --> 00:53:00,720
Speaker 6: want to hire, and you want to do these things.

1069
00:53:00,719 --> 00:53:04,840
Speaker 6: But you do, you do make more careful decisions because

1070
00:53:04,840 --> 00:53:06,880
Speaker 6: you don't know what could happen. But if you wait

1071
00:53:06,960 --> 00:53:08,880
Speaker 6: for the uncertainty clear, this is what he said, if

1072
00:53:08,920 --> 00:53:12,040
Speaker 6: you wait for the uncertainty to clear, you will find

1073
00:53:12,080 --> 00:53:14,040
Speaker 6: that four years later you've lost your business.

1074
00:53:14,200 --> 00:53:15,120
Speaker 5: So we're not doing it.

1075
00:53:15,760 --> 00:53:17,920
Speaker 2: So one of the things you've emphasized in your career

1076
00:53:18,000 --> 00:53:21,560
Speaker 2: is the importance of FED communication and the messaging. And

1077
00:53:21,680 --> 00:53:24,120
Speaker 2: I just want to go back to the Central Bank

1078
00:53:24,200 --> 00:53:28,920
Speaker 2: independence idea because one of the concerns I would argue

1079
00:53:28,960 --> 00:53:33,960
Speaker 2: right now is that sure, individual FED presidents Fed governors

1080
00:53:34,200 --> 00:53:37,680
Speaker 2: might emphasize that the central bank is in fact independent,

1081
00:53:37,800 --> 00:53:41,040
Speaker 2: but perhaps there's an optics problem. If in a month

1082
00:53:41,120 --> 00:53:44,120
Speaker 2: or so, the FED decides to lower rates while the

1083
00:53:44,120 --> 00:53:48,080
Speaker 2: president has been relentlessly posting on truth social about the

1084
00:53:48,160 --> 00:53:51,239
Speaker 2: need to lower interest rates, a lot of people would say, well,

1085
00:53:51,320 --> 00:53:53,040
Speaker 2: you know, that's the kind of thing that you might

1086
00:53:53,080 --> 00:53:56,839
Speaker 2: see in an emerging market or something like that. How

1087
00:53:56,840 --> 00:53:59,880
Speaker 2: do you manage that particular optics problem?

1088
00:54:01,080 --> 00:54:02,800
Speaker 5: You explain why you made the decision.

1089
00:54:03,280 --> 00:54:05,680
Speaker 6: Ultimately, if we just put the decision out, which is

1090
00:54:05,840 --> 00:54:08,480
Speaker 6: raised a flagpole saying interest rates have been cut twenty

1091
00:54:08,520 --> 00:54:11,239
Speaker 6: five basis point, I think we'd be very vulnerable to

1092
00:54:11,280 --> 00:54:14,000
Speaker 6: what you just said, because then optics dominate reality.

1093
00:54:14,320 --> 00:54:16,040
Speaker 5: But which you do instead.

1094
00:54:16,080 --> 00:54:18,400
Speaker 6: The remedy for that is be very open about how

1095
00:54:18,400 --> 00:54:21,439
Speaker 6: you're making the decision, how you're balancing the trade offs.

1096
00:54:21,480 --> 00:54:23,359
Speaker 6: And we were definitely in a trade off space right

1097
00:54:23,440 --> 00:54:26,920
Speaker 6: because we're not in the divine coincidence. The divine coincidence

1098
00:54:27,280 --> 00:54:28,960
Speaker 6: is a lovely place for central bankers to be. They

1099
00:54:29,000 --> 00:54:31,040
Speaker 6: wish they could live there all the time, where one

1100
00:54:31,080 --> 00:54:34,319
Speaker 6: interest rate solves both goals. Not where we are if

1101
00:54:34,360 --> 00:54:37,040
Speaker 6: we lower the interest rate, take some of the downward

1102
00:54:37,080 --> 00:54:39,520
Speaker 6: pressure off inflation, but we'll still get there.

1103
00:54:39,640 --> 00:54:40,959
Speaker 5: But we're supporting the labor market.

1104
00:54:41,120 --> 00:54:44,920
Speaker 6: If we completely support the labor market with no attention

1105
00:54:45,000 --> 00:54:46,879
Speaker 6: to inflation, we're likely to see it shoot up again.

1106
00:54:46,960 --> 00:54:49,719
Speaker 6: So not perhaps as how as it was before, but

1107
00:54:49,760 --> 00:54:52,400
Speaker 6: definitely there. So those are trade offs. We have to

1108
00:54:52,440 --> 00:54:55,720
Speaker 6: explain to the American people. We're making decisions under trade offs,

1109
00:54:55,840 --> 00:54:58,120
Speaker 6: and we're lowering the policy rate because we don't want

1110
00:54:58,160 --> 00:55:00,439
Speaker 6: to break the labor market in an effort to give

1111
00:55:00,760 --> 00:55:02,880
Speaker 6: you a little bit lower inflation a little bit faster.

1112
00:55:03,360 --> 00:55:05,879
Speaker 6: I think that's the burden on us. That's our responsibility.

1113
00:55:05,920 --> 00:55:06,880
Speaker 5: We have to do better at it.

1114
00:55:07,480 --> 00:55:10,239
Speaker 3: See here's another question that I'm curious about. Over the

1115
00:55:10,360 --> 00:55:13,120
Speaker 3: length of your career, do you feel like the stock

1116
00:55:13,200 --> 00:55:16,719
Speaker 3: market is more important to the economy than maybe it

1117
00:55:16,800 --> 00:55:19,400
Speaker 3: was twenty years ago. And you know, people look at

1118
00:55:19,440 --> 00:55:21,840
Speaker 3: financial conditions and there's many things that go into that,

1119
00:55:21,880 --> 00:55:23,840
Speaker 3: but one of them is just asset prices, which for

1120
00:55:23,960 --> 00:55:26,800
Speaker 3: many Americans who have some exposure of the stock market

1121
00:55:26,840 --> 00:55:30,400
Speaker 3: is just unbelievably fantastic time. And you're sort of again

1122
00:55:30,400 --> 00:55:34,480
Speaker 3: at ground zero of the companies that have driven helped

1123
00:55:34,520 --> 00:55:38,040
Speaker 3: many people retire comfortably in America out of the companies

1124
00:55:38,160 --> 00:55:40,239
Speaker 3: in your district. But when you think about like the

1125
00:55:40,280 --> 00:55:43,160
Speaker 3: sort of flywheel and momentum of the economy, does this

1126
00:55:43,320 --> 00:55:46,560
Speaker 3: sort of stock market component of financial conditions and the

1127
00:55:46,560 --> 00:55:49,200
Speaker 3: wealth effect perhaps is it more important to the economy

1128
00:55:49,239 --> 00:55:51,440
Speaker 3: than say it was when you started in central banking.

1129
00:55:51,800 --> 00:55:55,719
Speaker 6: Only from the standpoint that more people are accessing the

1130
00:55:55,760 --> 00:55:59,040
Speaker 6: stock market, but still not the majority of people. Right,

1131
00:55:59,160 --> 00:56:02,520
Speaker 6: More people have it, then have it four oh one k,

1132
00:56:02,760 --> 00:56:05,160
Speaker 6: or have some kind of an index fund that they're

1133
00:56:05,160 --> 00:56:08,200
Speaker 6: investing in, but it's not so universal that it's a

1134
00:56:08,200 --> 00:56:11,240
Speaker 6: main driver. What I have noticed is that since the

1135
00:56:11,280 --> 00:56:15,759
Speaker 6: stock market rebounded is that a lot of people who

1136
00:56:16,040 --> 00:56:17,680
Speaker 6: thought they were going to return to work from the

1137
00:56:17,680 --> 00:56:21,080
Speaker 6: fifty five and older went back into retirement or taking

1138
00:56:21,120 --> 00:56:23,200
Speaker 6: care of grand children because there was a lot of ideas.

1139
00:56:23,200 --> 00:56:25,480
Speaker 6: You know, that is a very sensitive group of people.

1140
00:56:25,680 --> 00:56:28,720
Speaker 6: And if you've retired and then you see your stock

1141
00:56:28,760 --> 00:56:31,359
Speaker 6: market evaluations fall, your four oh one K fall, you think, oh,

1142
00:56:31,360 --> 00:56:32,279
Speaker 6: maybe I should do something.

1143
00:56:32,320 --> 00:56:35,440
Speaker 3: But the rising stock market is contributing to labor market tightness.

1144
00:56:35,680 --> 00:56:38,560
Speaker 6: Well, if that was the main group we were relying

1145
00:56:38,680 --> 00:56:40,680
Speaker 6: on but I think that is something interesting. I mean,

1146
00:56:40,880 --> 00:56:44,560
Speaker 6: what's really contributing to the lower labor forces, immigration and

1147
00:56:44,600 --> 00:56:47,719
Speaker 6: the fact that we have a baby boom aging into retirement.

1148
00:56:47,760 --> 00:56:49,560
Speaker 6: But I think the stock market is more interesting from

1149
00:56:49,560 --> 00:56:53,600
Speaker 6: that point. I think, really what's even more interesting to

1150
00:56:53,680 --> 00:56:55,600
Speaker 6: me is the fact that you have to look at

1151
00:56:55,600 --> 00:56:58,040
Speaker 6: a variety of things. You have to look from how

1152
00:56:58,080 --> 00:57:01,320
Speaker 6: banks are doing, how private equities do, how the stock

1153
00:57:01,360 --> 00:57:02,080
Speaker 6: market's doing.

1154
00:57:02,120 --> 00:57:03,160
Speaker 5: What does it all tell you?

1155
00:57:03,200 --> 00:57:07,040
Speaker 6: And so we are broadening how we calculate financial conditions.

1156
00:57:07,120 --> 00:57:09,040
Speaker 6: You can't just look at the interest rates. I used

1157
00:57:09,080 --> 00:57:11,160
Speaker 6: to when I first started at the FED, when we

1158
00:57:11,160 --> 00:57:13,680
Speaker 6: were talking to our boards and councils, we had a

1159
00:57:13,680 --> 00:57:16,320
Speaker 6: little chart of interest rates, had the thirty year, the

1160
00:57:16,360 --> 00:57:19,200
Speaker 6: ten year, the two year treasury, and had a mortgage

1161
00:57:19,240 --> 00:57:22,160
Speaker 6: interest rate. Now you have to talk about financial conditions

1162
00:57:22,240 --> 00:57:25,680
Speaker 6: at large. Are they tighter, they are they softer? What

1163
00:57:25,840 --> 00:57:26,840
Speaker 6: is more accommodating?

1164
00:57:26,840 --> 00:57:27,280
Speaker 5: What is it?

1165
00:57:27,320 --> 00:57:29,400
Speaker 6: And I think that's a change in the marketplace. That's

1166
00:57:29,440 --> 00:57:33,000
Speaker 6: meant we all have to be very knowledgeable about the

1167
00:57:33,160 --> 00:57:35,760
Speaker 6: entirety of the forces that affect financial conditions.

1168
00:57:36,040 --> 00:57:39,000
Speaker 3: Since you mentioned baby boomers, there's something I've been thinking

1169
00:57:39,040 --> 00:57:41,320
Speaker 3: about a lot and it's not really I doubt it's

1170
00:57:41,360 --> 00:57:44,280
Speaker 3: a question that's particularly relevant for the short term path

1171
00:57:44,320 --> 00:57:47,200
Speaker 3: of monetary policy. But when we got that job support

1172
00:57:47,320 --> 00:57:50,520
Speaker 3: last week, the only two there were two sectors that

1173
00:57:50,640 --> 00:57:52,520
Speaker 3: drove the job gains, and it was like healthcare and

1174
00:57:52,560 --> 00:57:55,640
Speaker 3: social some sort of social assistance, so very similar things.

1175
00:57:56,000 --> 00:57:59,280
Speaker 3: Is clearly that this aging population is itself going to

1176
00:57:59,280 --> 00:58:02,080
Speaker 3: be a sustained source of labor demand, probably for a

1177
00:58:02,160 --> 00:58:04,680
Speaker 3: month after month, even in a possible recession. Right like

1178
00:58:04,960 --> 00:58:07,080
Speaker 3: this seems like mechanical. When you look out at the

1179
00:58:07,120 --> 00:58:09,680
Speaker 3: long term and you think about the American economy, how

1180
00:58:09,720 --> 00:58:13,000
Speaker 3: much concern do you have. I don't know if you'd

1181
00:58:13,000 --> 00:58:14,920
Speaker 3: call it a crowding out effect or something that, like

1182
00:58:15,160 --> 00:58:18,160
Speaker 3: the productive base of the economy, more and more of

1183
00:58:18,200 --> 00:58:21,160
Speaker 3: it will have to go do in some way, especially

1184
00:58:21,200 --> 00:58:23,880
Speaker 3: given the sort of demographic pyramids such as it is,

1185
00:58:23,920 --> 00:58:26,000
Speaker 3: in some way support seniors.

1186
00:58:26,080 --> 00:58:27,920
Speaker 4: We're all going to be working in nursing homes.

1187
00:58:28,000 --> 00:58:31,120
Speaker 6: Yeah, well, this has been something that we know is

1188
00:58:31,160 --> 00:58:34,160
Speaker 6: coming for thirty years. I started my career, I started

1189
00:58:34,160 --> 00:58:38,600
Speaker 6: writing my dissertation on aging and taking care of people

1190
00:58:38,600 --> 00:58:41,320
Speaker 6: and how does it change the economy and what do

1191
00:58:41,360 --> 00:58:43,640
Speaker 6: we have to do and how does it change growth

1192
00:58:43,800 --> 00:58:46,400
Speaker 6: and output and potential. And one of the things you

1193
00:58:46,400 --> 00:58:49,080
Speaker 6: can see is if you lose workers then they go

1194
00:58:49,120 --> 00:58:52,240
Speaker 6: into retirement, you're going to constrain labor supply labor growth,

1195
00:58:52,360 --> 00:58:54,600
Speaker 6: but you're also going to tip the pyramid of what

1196
00:58:54,600 --> 00:58:56,120
Speaker 6: we have to produce and what we have to take

1197
00:58:56,120 --> 00:58:59,080
Speaker 6: care of. And so that's happening. You can see healthcare

1198
00:58:59,120 --> 00:59:02,520
Speaker 6: is growing, etc. Education now just in state budgets. If

1199
00:59:02,520 --> 00:59:04,880
Speaker 6: you look at state budgets, there's a battle between do

1200
00:59:04,960 --> 00:59:07,920
Speaker 6: we take care of our older citizens or do we

1201
00:59:08,080 --> 00:59:11,520
Speaker 6: invest in education? And it sounds, you know, it's dire sounding,

1202
00:59:11,600 --> 00:59:14,280
Speaker 6: but honestly, that's the trade offs. We're a nation now

1203
00:59:14,320 --> 00:59:18,320
Speaker 6: who has a very un aging population with increasing needs

1204
00:59:18,800 --> 00:59:23,760
Speaker 6: and the younger population and even the economic productive capacity

1205
00:59:23,840 --> 00:59:26,960
Speaker 6: has to support that. So the answer to that is

1206
00:59:26,960 --> 00:59:29,080
Speaker 6: you have to grow the economy and you have to

1207
00:59:29,120 --> 00:59:31,840
Speaker 6: be strategic enough. And it's not the Fed's job, but

1208
00:59:31,920 --> 00:59:34,520
Speaker 6: this is something that I think many Americans are trying

1209
00:59:34,520 --> 00:59:37,160
Speaker 6: to do. Many governments are trying to do a national

1210
00:59:37,160 --> 00:59:40,360
Speaker 6: and state and local how do you create an economy

1211
00:59:40,640 --> 00:59:44,840
Speaker 6: that can support those and still support the citizenry that

1212
00:59:45,120 --> 00:59:48,560
Speaker 6: is in their working age and literal families. Well, you're

1213
00:59:48,560 --> 00:59:51,240
Speaker 6: going to use technology, of course, and you're going to

1214
00:59:51,560 --> 00:59:54,880
Speaker 6: think about, you know, making more strategic decisions about what

1215
00:59:54,920 --> 00:59:56,840
Speaker 6: do we need to do to ensure that we have

1216
00:59:56,880 --> 01:00:01,240
Speaker 6: a diverse economy, etc. The concentration in education and healthcare

1217
01:00:01,280 --> 01:00:03,760
Speaker 6: and other things that we've been seeing that's not new.

1218
01:00:04,360 --> 01:00:07,160
Speaker 6: I mean, thats been going on. People were talking about

1219
01:00:07,160 --> 01:00:08,760
Speaker 6: that a couple of years ago or a year ago.

1220
01:00:09,200 --> 01:00:10,560
Speaker 6: What's interesting is.

1221
01:00:10,480 --> 01:00:12,080
Speaker 5: How durable will that be? Right?

1222
01:00:12,160 --> 01:00:15,080
Speaker 6: Healthcare makes good jobs and it helps the economy because

1223
01:00:15,080 --> 01:00:17,360
Speaker 6: it puts resources, They earn a living, they come back,

1224
01:00:17,400 --> 01:00:19,200
Speaker 6: they buy things if they want to be in healthcare.

1225
01:00:19,600 --> 01:00:20,680
Speaker 5: But we don't have enough.

1226
01:00:20,480 --> 01:00:23,680
Speaker 6: People currently interested in healthcare to support that if it

1227
01:00:23,760 --> 01:00:26,640
Speaker 6: keeps on growing. I think that's another challenge that you're seeing,

1228
01:00:26,720 --> 01:00:29,400
Speaker 6: and hospitals across the country are trying to manage that.

1229
01:00:30,120 --> 01:00:33,680
Speaker 2: Since Joe asked you a wealth effect from Stock's question,

1230
01:00:33,920 --> 01:00:36,040
Speaker 2: I'm going to ask a very similar question in relation

1231
01:00:36,160 --> 01:00:39,800
Speaker 2: to crypto because this is actually something that has changed

1232
01:00:39,880 --> 01:00:41,960
Speaker 2: quite a bit since we last spoke to you. I mean,

1233
01:00:42,040 --> 01:00:45,640
Speaker 2: crypto prices are still going up, the industry seems to

1234
01:00:45,640 --> 01:00:47,640
Speaker 2: be expanding, The administration.

1235
01:00:47,080 --> 01:00:49,760
Speaker 4: Is clearly very very crypto friendly.

1236
01:00:49,800 --> 01:00:53,240
Speaker 2: Are we at the point where crypto perhaps matters from

1237
01:00:53,280 --> 01:00:58,720
Speaker 2: monetary policy, either from a sentiment perspective, that wealth effect perspective,

1238
01:00:58,920 --> 01:01:02,160
Speaker 2: or from a finance stability perspective, which, of course you

1239
01:01:02,200 --> 01:01:05,520
Speaker 2: know as San Francisco FED President, that's under your mandate

1240
01:01:05,520 --> 01:01:05,880
Speaker 2: as well.

1241
01:01:06,520 --> 01:01:09,840
Speaker 6: So the way I think about crypto and the conversations

1242
01:01:09,840 --> 01:01:12,680
Speaker 6: about stable coins and other things, so let's separate crypto

1243
01:01:12,680 --> 01:01:14,920
Speaker 6: from stable coins. For an it we put in a

1244
01:01:14,920 --> 01:01:17,640
Speaker 6: big umbrella and people think it's the same, specifically very different.

1245
01:01:17,680 --> 01:01:20,360
Speaker 6: So a stable coin is another way to fund yourself.

1246
01:01:20,400 --> 01:01:22,840
Speaker 6: So you can do you can trade, right, I can

1247
01:01:22,880 --> 01:01:25,200
Speaker 6: do a cross border transaction. I don't have to wait,

1248
01:01:25,280 --> 01:01:27,880
Speaker 6: I don't have to do currency changes, and so those

1249
01:01:27,880 --> 01:01:31,280
Speaker 6: things are just about a technology or an innovation that

1250
01:01:31,440 --> 01:01:36,120
Speaker 6: smooths out these change particularly across borders. The crypto is

1251
01:01:36,160 --> 01:01:38,920
Speaker 6: an asset. This is just it's a digital asset. So

1252
01:01:39,000 --> 01:01:41,200
Speaker 6: you can invest in it and it can grow, but

1253
01:01:41,200 --> 01:01:44,200
Speaker 6: it can also decline, and I think there's appetite for

1254
01:01:44,560 --> 01:01:46,680
Speaker 6: other kinds of assets to invest in. You don't have

1255
01:01:46,720 --> 01:01:49,600
Speaker 6: to invest in a mainline blue chip company. You can

1256
01:01:49,640 --> 01:01:52,000
Speaker 6: invest in this and you can get some gains so

1257
01:01:52,040 --> 01:01:55,200
Speaker 6: the question for me is always how do we incorporate

1258
01:01:55,760 --> 01:02:00,640
Speaker 6: that maybe it's enthusiasm and also that risk into our

1259
01:02:01,080 --> 01:02:05,960
Speaker 6: assessment of how lose or tighter financial conditions and how

1260
01:02:06,200 --> 01:02:11,480
Speaker 6: vulnerable is the economy to financial stability concerns. So you're

1261
01:02:11,560 --> 01:02:13,280
Speaker 6: right to ask, you know, is it big enough now

1262
01:02:13,280 --> 01:02:14,600
Speaker 6: that we would look at it. I think it is

1263
01:02:14,600 --> 01:02:16,480
Speaker 6: big enough, we would look at it. It's not that

1264
01:02:16,560 --> 01:02:19,600
Speaker 6: it's big today so it's material. It's that it's big

1265
01:02:19,640 --> 01:02:21,760
Speaker 6: and growing. It's getting bigger every time.

1266
01:02:21,840 --> 01:02:23,760
Speaker 4: So the direction of travel, direction of.

1267
01:02:23,720 --> 01:02:26,760
Speaker 6: Travel, I feel a little bit like back in the

1268
01:02:26,880 --> 01:02:30,800
Speaker 6: nineties you could see people doing some well maybe really

1269
01:02:30,840 --> 01:02:33,680
Speaker 6: the two thousands after the Dot comes, you saw people

1270
01:02:33,720 --> 01:02:37,360
Speaker 6: doing Internet purchases, and we would collect retail statistics on

1271
01:02:37,440 --> 01:02:39,280
Speaker 6: how many things were brought on the Internet, and people

1272
01:02:39,280 --> 01:02:41,240
Speaker 6: would regularly say, that's not big enough, don't.

1273
01:02:41,040 --> 01:02:41,720
Speaker 2: Worry about it.

1274
01:02:41,760 --> 01:02:43,840
Speaker 6: But you know, you have to look ahead, right It

1275
01:02:43,920 --> 01:02:45,800
Speaker 6: might not be big enough today, but you don't have

1276
01:02:45,880 --> 01:02:49,720
Speaker 6: time to practice and develop metrics and practice your evaluations

1277
01:02:49,720 --> 01:02:53,200
Speaker 6: and learn from that if you wait till it's a giant.

1278
01:02:53,280 --> 01:02:55,400
Speaker 6: So I think absolutely we have to think about it

1279
01:02:55,480 --> 01:02:57,960
Speaker 6: right now and assess it as part of what we do,

1280
01:02:58,000 --> 01:03:00,320
Speaker 6: and the good news is we are assessing it and

1281
01:03:00,360 --> 01:03:03,720
Speaker 6: I don't see special particular risks to this. And I

1282
01:03:03,720 --> 01:03:05,720
Speaker 6: think Congress is doing what Congress is supposed to do,

1283
01:03:05,840 --> 01:03:08,760
Speaker 6: looking over the parameters and saying, what's a stable coin

1284
01:03:09,280 --> 01:03:11,440
Speaker 6: process that can work? How do we ring fence these

1285
01:03:11,480 --> 01:03:13,440
Speaker 6: types of things? That's what you want, but that doesn't

1286
01:03:13,440 --> 01:03:18,480
Speaker 6: have those powers. We're implementing our policy that in the

1287
01:03:18,520 --> 01:03:21,560
Speaker 6: economy we have, and our elected officials are deciding the

1288
01:03:21,600 --> 01:03:23,120
Speaker 6: parameters of those exchanges.

1289
01:03:23,800 --> 01:03:26,720
Speaker 3: I think I actually just have one more question, and

1290
01:03:26,760 --> 01:03:30,240
Speaker 3: it's very sort of straight down in the middle macro.

1291
01:03:30,360 --> 01:03:33,280
Speaker 3: But you know there's this obviously, you know, slowing in

1292
01:03:33,320 --> 01:03:37,800
Speaker 3: some areas, et cetera. You've described the state of the

1293
01:03:37,840 --> 01:03:41,840
Speaker 3: interest rates setting is still in restrictive territorial least modestly restrictive.

1294
01:03:42,280 --> 01:03:45,920
Speaker 3: Yet inflation is still durably above target, not massively the

1295
01:03:45,960 --> 01:03:47,560
Speaker 3: way it was a couple of years ago.

1296
01:03:47,880 --> 01:03:50,960
Speaker 6: Why is that it takes time? Once inflation gets up,

1297
01:03:51,120 --> 01:03:53,320
Speaker 6: it takes time to bring it down. And you know

1298
01:03:53,360 --> 01:03:55,800
Speaker 6: the reason you would adjust policy before you totally get there.

1299
01:03:55,880 --> 01:03:58,000
Speaker 6: Let's put terras aside from it, and let's just think

1300
01:03:58,040 --> 01:04:00,880
Speaker 6: about the regular dynamics of the economy. If you wait

1301
01:04:00,920 --> 01:04:03,240
Speaker 6: to see the whites of the eyes of two percent inflation,

1302
01:04:03,480 --> 01:04:07,520
Speaker 6: you will be too late. Because policy tightness today is

1303
01:04:07,560 --> 01:04:09,800
Speaker 6: not just a reflection of where interest rates are today.

1304
01:04:09,840 --> 01:04:11,680
Speaker 6: It's a reflection of where our interest rates have been

1305
01:04:11,720 --> 01:04:14,000
Speaker 6: over the last twelve to eighteen months. And they've been

1306
01:04:14,080 --> 01:04:17,520
Speaker 6: modestly restrictive, so they're gradually selling the economy and gradually

1307
01:04:17,560 --> 01:04:19,120
Speaker 6: bringing inflation down.

1308
01:04:19,240 --> 01:04:21,000
Speaker 5: And the thing we'd been waiting.

1309
01:04:20,720 --> 01:04:22,440
Speaker 6: For, at least I had been waiting for for a

1310
01:04:22,480 --> 01:04:24,520
Speaker 6: long time, was for this to start showing through the

1311
01:04:24,600 --> 01:04:27,760
Speaker 6: housing sector, and it has been in the last several months,

1312
01:04:27,880 --> 01:04:30,480
Speaker 6: and so that's a really big and important sector that

1313
01:04:30,520 --> 01:04:32,920
Speaker 6: has to have inflation come down for us to achieve

1314
01:04:32,920 --> 01:04:36,640
Speaker 6: our two percent goal. So if you started extrapolating services,

1315
01:04:36,640 --> 01:04:41,040
Speaker 6: inflation excluding housing is coming down. Housing's coming down, The

1316
01:04:41,080 --> 01:04:44,400
Speaker 6: goods sector without the tariffs was coming down, and so

1317
01:04:44,440 --> 01:04:46,400
Speaker 6: you get all of those things, and that's pushing you

1318
01:04:46,440 --> 01:04:48,480
Speaker 6: to two percent. We have to adjust policy before we

1319
01:04:48,520 --> 01:04:51,120
Speaker 6: get there, because remember, anything we do, if we left

1320
01:04:51,320 --> 01:04:54,240
Speaker 6: exactly where it is, that's another effect for another twelve

1321
01:04:54,280 --> 01:04:56,840
Speaker 6: to eighteen months. Who knows what exactly the lags of

1322
01:04:56,840 --> 01:04:59,480
Speaker 6: monetary policy are The only thing people can agree with

1323
01:04:59,800 --> 01:05:00,720
Speaker 6: is as a lack.

1324
01:05:02,040 --> 01:05:04,960
Speaker 2: Just in terms of the importance of speed. Here, if

1325
01:05:04,960 --> 01:05:08,880
Speaker 2: you got confirmation of significant weakening in the labor market,

1326
01:05:08,960 --> 01:05:11,360
Speaker 2: could a fifty basis point cut beyond the table?

1327
01:05:12,040 --> 01:05:14,560
Speaker 6: You know in central banking, and this is true at

1328
01:05:14,600 --> 01:05:17,080
Speaker 6: the FED, but I think other central banks as well.

1329
01:05:17,240 --> 01:05:20,760
Speaker 6: You never want to rule out a tool simply because

1330
01:05:20,800 --> 01:05:22,800
Speaker 6: we haven't used it before, and we did use our

1331
01:05:22,840 --> 01:05:25,720
Speaker 6: tools in an aggressive way. But one shouldn't take that

1332
01:05:25,760 --> 01:05:28,080
Speaker 6: to me, and I think that's the likely outcome. But

1333
01:05:28,200 --> 01:05:29,760
Speaker 6: I do think we should think of all of our

1334
01:05:29,760 --> 01:05:32,040
Speaker 6: tools and all of our meetings as being available to

1335
01:05:32,120 --> 01:05:35,080
Speaker 6: us at all times. Because the job isn't pick a

1336
01:05:35,120 --> 01:05:37,840
Speaker 6: tool that's exactly the one that everybody expects you to use.

1337
01:05:38,080 --> 01:05:42,280
Speaker 6: The job is restore price stability and do it without

1338
01:05:42,440 --> 01:05:45,520
Speaker 6: tripping up the labor market and leaving people with lower

1339
01:05:45,520 --> 01:05:47,040
Speaker 6: inflation but no jobs.

1340
01:05:47,440 --> 01:05:52,560
Speaker 3: I actually have one. This happens a lot, but the dollar.

1341
01:05:52,760 --> 01:05:54,120
Speaker 3: You know, you look at a lot of charts in

1342
01:05:54,160 --> 01:05:56,880
Speaker 3: April second and there's been the bottom, but then they

1343
01:05:57,000 --> 01:05:59,080
Speaker 3: jump back up. We haven't seen that with the dollar,

1344
01:05:59,160 --> 01:06:03,439
Speaker 3: and I'm curious. You know, people are concerned about political

1345
01:06:03,800 --> 01:06:07,240
Speaker 3: continuity and stability and institutional stability in the United States,

1346
01:06:07,280 --> 01:06:09,800
Speaker 3: and the attacks on the FED are real, even if

1347
01:06:09,840 --> 01:06:12,800
Speaker 3: the fact that it doesn't change how you do your

1348
01:06:12,880 --> 01:06:16,080
Speaker 3: day to day job, and dollar weakness could itself be

1349
01:06:16,120 --> 01:06:18,479
Speaker 3: inflationary because we do have an import bill, et cetera.

1350
01:06:18,560 --> 01:06:20,800
Speaker 3: I'm just sort of curious, like how you think about

1351
01:06:20,840 --> 01:06:23,800
Speaker 3: the sort of I guess maybe medium term when you're

1352
01:06:23,800 --> 01:06:26,320
Speaker 3: thinking about, Okay, you have to hit your mandate, these

1353
01:06:26,360 --> 01:06:29,080
Speaker 3: things that are really outside of your control, completely outside

1354
01:06:29,080 --> 01:06:31,160
Speaker 3: of our our control, But like, how do you think

1355
01:06:31,200 --> 01:06:33,960
Speaker 3: about them in terms of hitting your mandate at a

1356
01:06:33,960 --> 01:06:37,160
Speaker 3: time when yeah, there are these sort of like factors

1357
01:06:37,200 --> 01:06:39,720
Speaker 3: that affect macro that seem outside of your control.

1358
01:06:39,840 --> 01:06:42,920
Speaker 6: Well, you know, if you take the just take the

1359
01:06:43,200 --> 01:06:45,919
Speaker 6: idea that we import things, if the cost of those

1360
01:06:46,640 --> 01:06:49,680
Speaker 6: imports goes up either because the dollar is weaker, we

1361
01:06:49,720 --> 01:06:52,120
Speaker 6: don't make dollar policy just going to say that we

1362
01:06:52,160 --> 01:06:54,840
Speaker 6: take the dollars outside of our world is just another

1363
01:06:54,840 --> 01:06:57,360
Speaker 6: input to our equation. But if you have a weaker

1364
01:06:57,400 --> 01:07:00,680
Speaker 6: dollar and you're paying them more to import things, or

1365
01:07:00,720 --> 01:07:03,000
Speaker 6: you have tariffs so you're paying more to import things,

1366
01:07:03,320 --> 01:07:05,760
Speaker 6: well then that's just going to raise the rate of

1367
01:07:05,800 --> 01:07:08,200
Speaker 6: inflation to put upward pressure on inflation. So then the

1368
01:07:08,200 --> 01:07:11,120
Speaker 6: Fed has to think, Okay, what are the things creating

1369
01:07:11,200 --> 01:07:13,640
Speaker 6: upward pressure on inflation, and what are the things creating

1370
01:07:13,640 --> 01:07:16,240
Speaker 6: downward pressure on inflation, and how do we navigate that

1371
01:07:16,280 --> 01:07:19,680
Speaker 6: to get to two percent inflation. That's the job, regardless

1372
01:07:19,680 --> 01:07:22,360
Speaker 6: of whether you always have things that are pushing inflation

1373
01:07:22,520 --> 01:07:25,680
Speaker 6: up and pulling inflation down. Our job is to net

1374
01:07:25,760 --> 01:07:29,280
Speaker 6: those things and say what's left, and whatever's left we

1375
01:07:29,800 --> 01:07:31,520
Speaker 6: use the interest rate to achieve.

1376
01:07:32,240 --> 01:07:35,240
Speaker 3: And I'm sorry, I I knew this was going to happen.

1377
01:07:36,000 --> 01:07:39,320
Speaker 3: At some point, Chairman Paula is going to be replaced.

1378
01:07:39,480 --> 01:07:41,800
Speaker 3: I don't know if the President will try to fire him,

1379
01:07:41,840 --> 01:07:45,000
Speaker 3: but his term will expire and a new nominee will

1380
01:07:45,040 --> 01:07:48,200
Speaker 3: come up. From the perspective of a regional Fed president,

1381
01:07:48,840 --> 01:07:52,160
Speaker 3: what is an important quality of the chairman in terms

1382
01:07:52,200 --> 01:07:55,680
Speaker 3: of like being successful and working with the rest of

1383
01:07:55,680 --> 01:07:56,280
Speaker 3: the f YMC.

1384
01:07:56,680 --> 01:07:59,320
Speaker 6: You know, I think you could be a regional Fed president.

1385
01:07:59,400 --> 01:08:01,280
Speaker 6: You could be anyone who works at the Federal Reserve

1386
01:08:01,440 --> 01:08:04,760
Speaker 6: in the Federal Reserve system. You could simply be a

1387
01:08:04,840 --> 01:08:07,120
Speaker 6: citizen of the United States. So someone who cares deeply

1388
01:08:07,120 --> 01:08:10,480
Speaker 6: about how the country goes, and the requirements are always

1389
01:08:10,480 --> 01:08:13,800
Speaker 6: the same. You put other people first above your own self.

1390
01:08:13,960 --> 01:08:16,800
Speaker 6: You think about decisions that serve the American people, and

1391
01:08:16,880 --> 01:08:20,640
Speaker 6: you do that without flinching if the criticism comes. As

1392
01:08:20,680 --> 01:08:22,720
Speaker 6: long as you're doing and you're using your committee and

1393
01:08:22,760 --> 01:08:24,599
Speaker 6: you're getting to a judgment that you think is best

1394
01:08:24,600 --> 01:08:27,240
Speaker 6: for the American people, that's an important quality. And the

1395
01:08:27,240 --> 01:08:30,760
Speaker 6: other important quality is to listen. The diversity of the

1396
01:08:30,800 --> 01:08:35,560
Speaker 6: inputs we get from all types of people, businesses, communities, markets,

1397
01:08:35,800 --> 01:08:40,280
Speaker 6: that's important. The disagreements or differences of lens that people

1398
01:08:40,320 --> 01:08:41,800
Speaker 6: put on things and say, well, I don't see the

1399
01:08:41,800 --> 01:08:44,840
Speaker 6: world like that. Any leader, no matter what they're leading,

1400
01:08:45,120 --> 01:08:47,880
Speaker 6: has to be able to listen to be successful. That's

1401
01:08:47,960 --> 01:08:50,360
Speaker 6: my personal belief. You have to listen. You have to

1402
01:08:50,439 --> 01:08:54,080
Speaker 6: know what you put your best ideas out there. You

1403
01:08:54,080 --> 01:08:56,240
Speaker 6: have to be willing to listen to criticisms or support,

1404
01:08:56,520 --> 01:08:59,640
Speaker 6: and then you have to turn around and ask people

1405
01:09:00,200 --> 01:09:02,920
Speaker 6: this disagreement to our advantage as opposed to using it

1406
01:09:02,960 --> 01:09:05,840
Speaker 6: as a way to divide. And I think that's the

1407
01:09:06,000 --> 01:09:09,479
Speaker 6: historically what have made the most successful FED chairs. But honestly,

1408
01:09:09,520 --> 01:09:12,240
Speaker 6: it makes a successful committee member. We all have to

1409
01:09:12,280 --> 01:09:14,599
Speaker 6: go in with the idea that this is not about us,

1410
01:09:15,160 --> 01:09:16,720
Speaker 6: This is about the people we serve.

1411
01:09:16,920 --> 01:09:18,960
Speaker 5: We know who those are, the American people.

1412
01:09:19,160 --> 01:09:21,120
Speaker 2: Joe, we should run for FED chairs. All we do

1413
01:09:21,240 --> 01:09:24,080
Speaker 2: is listen basically, but.

1414
01:09:24,000 --> 01:09:26,719
Speaker 5: Then you do have to decide, Yeah, all.

1415
01:09:26,680 --> 01:09:28,920
Speaker 2: Right, all right, we're not that good at that, all right,

1416
01:09:28,920 --> 01:09:30,960
Speaker 2: Mary Daily, Thank you so much for coming back on

1417
01:09:31,000 --> 01:09:31,519
Speaker 2: all lots.

1418
01:09:31,600 --> 01:09:33,519
Speaker 5: My complete pleasure. And I'm so glad we did it

1419
01:09:33,520 --> 01:09:34,080
Speaker 5: in Alaska.

1420
01:09:34,479 --> 01:09:37,600
Speaker 3: Yeah that we get to travel to Alaska.

1421
01:09:37,840 --> 01:09:50,800
Speaker 7: Thank you, Joe.

1422
01:09:51,400 --> 01:09:53,840
Speaker 2: That was a real treat of a conversation, being able

1423
01:09:53,880 --> 01:09:57,400
Speaker 2: to interview the San Francisco FED president for over an

1424
01:09:57,439 --> 01:09:59,360
Speaker 2: hour in Alaska.

1425
01:09:58,760 --> 01:09:59,559
Speaker 4: Of all places.

1426
01:10:00,120 --> 01:10:02,479
Speaker 2: I do really like how she summarized the idea of

1427
01:10:02,520 --> 01:10:06,080
Speaker 2: the state as like this really good microcosm at the

1428
01:10:06,120 --> 01:10:10,240
Speaker 2: moment of all these different cross currents in the US economy,

1429
01:10:10,320 --> 01:10:16,240
Speaker 2: particularly tariffs, inflation, housing, immigration. And I also liked how

1430
01:10:16,280 --> 01:10:20,160
Speaker 2: she explained that the important thing about running a regional

1431
01:10:20,280 --> 01:10:23,879
Speaker 2: district is kind of knowing which states are more useful

1432
01:10:23,960 --> 01:10:28,240
Speaker 2: to look at for leading indicators versus others at different times.

1433
01:10:28,439 --> 01:10:29,679
Speaker 2: I hadn't thought about that before.

1434
01:10:30,160 --> 01:10:33,800
Speaker 3: No, it's really interesting, And that was obviously a real treat.

1435
01:10:33,840 --> 01:10:35,760
Speaker 3: This whole trip is a real treat to get to

1436
01:10:35,760 --> 01:10:38,240
Speaker 3: come to Alaska, which we had never been to, to

1437
01:10:38,320 --> 01:10:42,080
Speaker 3: learn about new economies and so forth. Also to just

1438
01:10:42,120 --> 01:10:44,879
Speaker 3: get that much time with a member of the FMC,

1439
01:10:45,080 --> 01:10:48,840
Speaker 3: a regional FED president. Because yes, there's always uncertainty, right,

1440
01:10:48,920 --> 01:10:52,000
Speaker 3: but we have a lot of uncertainty these days, and

1441
01:10:52,040 --> 01:10:54,720
Speaker 3: there's so many short term and long term questions that

1442
01:10:54,800 --> 01:10:57,320
Speaker 3: are super interesting to me. Whether it's the sort of

1443
01:10:57,360 --> 01:11:01,400
Speaker 3: demographic things, whether it's the diffusion of but also just

1444
01:11:01,439 --> 01:11:03,599
Speaker 3: like what is going on over the last few months

1445
01:11:03,640 --> 01:11:07,559
Speaker 3: with the impact of the tariffs on economic activity, Like,

1446
01:11:07,680 --> 01:11:10,960
Speaker 3: we have both short term and long term questions right

1447
01:11:11,000 --> 01:11:11,840
Speaker 3: now that are very big.

1448
01:11:11,960 --> 01:11:13,800
Speaker 2: Well, that was another thing that stood out to me,

1449
01:11:14,080 --> 01:11:17,679
Speaker 2: the idea that the revisions in the most recent jobs

1450
01:11:17,760 --> 01:11:22,799
Speaker 2: report weren't in themselves like that surprising because they actually

1451
01:11:22,920 --> 01:11:26,920
Speaker 2: confirmed what people had been expressing in sentiment surveys for

1452
01:11:26,960 --> 01:11:29,320
Speaker 2: like some months now, right, And so for Mary it

1453
01:11:29,400 --> 01:11:33,000
Speaker 2: was sort of like, oh, actually the aberration is that

1454
01:11:33,040 --> 01:11:35,799
Speaker 2: this wasn't showing up in the job's numbers, the official

1455
01:11:35,880 --> 01:11:37,160
Speaker 2: jobs numbers sooner.

1456
01:11:37,520 --> 01:11:41,759
Speaker 3: Yeah, it's interesting because I remember like those ism for example,

1457
01:11:41,800 --> 01:11:44,360
Speaker 3: reports from April and May. Yeah, they did not show

1458
01:11:44,920 --> 01:11:47,479
Speaker 3: the employment subje they were very bad. But this employment

1459
01:11:47,520 --> 01:11:50,360
Speaker 3: subm in the season particular were bad, So it does

1460
01:11:50,479 --> 01:11:53,639
Speaker 3: sort of yeah, the revisions. Although no one people don't

1461
01:11:53,640 --> 01:11:57,280
Speaker 3: love seeing Oh this data is wrong, it certainly fits

1462
01:11:57,360 --> 01:11:59,800
Speaker 3: more with the broader story. It makes things a little

1463
01:11:59,800 --> 01:12:01,680
Speaker 3: bit more or kojin. So it's interesting to hear that.

1464
01:12:02,040 --> 01:12:04,480
Speaker 2: You know, the other thing I liked about that conversation

1465
01:12:05,280 --> 01:12:06,439
Speaker 2: you didn't mention Wales.

1466
01:12:06,640 --> 01:12:09,760
Speaker 4: Once you've now I've reminded you.

1467
01:12:09,880 --> 01:12:14,280
Speaker 2: So okay, listeners, steal yourself for Joe inserting a lot

1468
01:12:14,320 --> 01:12:17,920
Speaker 2: of whale and moby Dick commentary into the next few episodes.

1469
01:12:18,160 --> 01:12:22,400
Speaker 3: Is the soft landing? No, I don't think so. It's

1470
01:12:22,760 --> 01:12:24,120
Speaker 3: a it's a moral thing to persis.

1471
01:12:24,360 --> 01:12:25,439
Speaker 4: Okay, shall we leave it there.

1472
01:12:25,479 --> 01:12:26,160
Speaker 3: Let's leave it there.

1473
01:12:26,360 --> 01:12:28,679
Speaker 2: This has been another episode of The Odd Lots Podcast.

1474
01:12:28,760 --> 01:12:31,479
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway

1475
01:12:31,680 --> 01:12:32,800
Speaker 2: and I'm Joe Wisenthal.

1476
01:12:32,840 --> 01:12:35,080
Speaker 3: You can follow me at The Stalwart. Follow our guest

1477
01:12:35,080 --> 01:12:38,760
Speaker 3: Mary Daily, She's at Mary Daily Econ. Follow our producers

1478
01:12:38,800 --> 01:12:41,919
Speaker 3: Kerman Rodriguez at Kerman armand dash El Bennett at Dashbot

1479
01:12:41,920 --> 01:12:44,920
Speaker 3: and Cal Brooks at cal Brooks. More odd Lots content,

1480
01:12:44,960 --> 01:12:47,200
Speaker 3: go to Bloomberg dot com slash odd lots or the

1481
01:12:47,280 --> 01:12:49,920
Speaker 3: daily newsletter and all of our episodes and you can

1482
01:12:50,000 --> 01:12:51,920
Speaker 3: chat about all of these topics twenty four to seven

1483
01:12:52,000 --> 01:12:55,360
Speaker 3: in our discord Discord dot gg slash od lots.

1484
01:12:55,240 --> 01:12:57,320
Speaker 2: And if you enjoy od loots, if you like it

1485
01:12:57,400 --> 01:13:00,000
Speaker 2: when we go on field trips to Alaska, then please

1486
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Speaker 2: leave us a positive review on your favorite podcast platform.

1487
01:13:03,200 --> 01:13:05,920
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1488
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1489
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1490
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