WEBVTT - Atlanta Fed President Raphael Bostic Talks Inflation, Jerome Powell

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Good morning.

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<v Speaker 3>I'm Michael McKee, the international economics and policy correspondent for Bloomberg,

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<v Speaker 3>and we are here in Atlanta. Welcome to all of

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<v Speaker 3>our viewers and listeners around the world on Bloomberg Television

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<v Speaker 3>and Radio. We're speaking with the Atlanta Fed President, Rafael Bostik,

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<v Speaker 3>who is retiring at the end of this month. So

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<v Speaker 3>this is sort of your HR exit exit interview.

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<v Speaker 1>Mike, it's always good to see you.

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<v Speaker 3>I want to ask you, as you travel around your

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<v Speaker 3>district for the past year, what's the mood like among

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<v Speaker 3>companies and consumers. We've seen the surveys show that people

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<v Speaker 3>are getting very, very pessimistic.

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<v Speaker 1>Well, I'd say it runs in two ways.

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<v Speaker 4>So, first of all, what has been true throughout the

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<v Speaker 4>last year is a tremendous amount of resilience on the

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<v Speaker 4>part of both.

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<v Speaker 1>But this is and consumers.

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<v Speaker 4>You know, April second, when ther were announced at very

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<v Speaker 4>high levels. That put everyone back on their heels, and

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<v Speaker 4>there's a lot of uncertainty. And what's happened through the

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<v Speaker 4>year is people have figured out ways to deal with

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<v Speaker 4>that uncertainty. So as for today, I think most businesses

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<v Speaker 4>and most households are not thinking that the worst of

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<v Speaker 4>the possible outcomes.

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<v Speaker 1>Are going to happen. They're not sure they can get

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<v Speaker 1>to the best ones.

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<v Speaker 4>But everyone's trying to find a steady state where they

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<v Speaker 4>can get through. So I think the sentiment is one

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<v Speaker 4>of cautious optimism. But I put emphasis on the cautious

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<v Speaker 4>as opposed to the optimism. I think people that are really

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<v Speaker 4>trying to wait and see what happens.

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<v Speaker 2>Well, what do you think that means for the economy.

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<v Speaker 4>Well, I think it means that the things that we've

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<v Speaker 4>seen for the second half of twenty twenty five we

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<v Speaker 4>will continue to see through twenty twenty six. And I've

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<v Speaker 4>talked to a lot of folks in the last six

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<v Speaker 4>weeks or so, and they said, we think our experiences

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<v Speaker 4>in October and November December are likely to move on.

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<v Speaker 1>And then there are some reasons.

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<v Speaker 4>Why they think it might actually get stronger.

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<v Speaker 1>You know, the tariffs.

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<v Speaker 4>People have gotten used to those, and so those effects

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<v Speaker 4>will run through by the middle of the year. We've

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<v Speaker 4>seen some of the stimulative aspects of the tax bill

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<v Speaker 4>last summer.

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<v Speaker 1>Those will be coming on board.

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<v Speaker 4>And if consumers start to feel like there's more certainty

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<v Speaker 4>then I think businesses, I think there's some upside potential

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<v Speaker 4>in the economy.

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<v Speaker 3>Well, this last week we've gotten a lot of bad

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<v Speaker 3>news on the employment front with ADP and Challenger and

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<v Speaker 3>the other numbers that have come out. Does any of

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<v Speaker 3>that you don't have another meeting to vote at, But

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<v Speaker 3>does any of that give you pause about the FED

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<v Speaker 3>pausing at this point?

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<v Speaker 4>For me, no, I think we've been in a situation

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<v Speaker 4>where inflation has been too high for too long, and

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<v Speaker 4>by many readings it's been kind of marking time has

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<v Speaker 4>been at a plateau well above our target for the

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<v Speaker 4>better part of two years. That's not acceptable, and for me,

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<v Speaker 4>I think we can't lose sight of the inflationary concerns.

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<v Speaker 4>The labor market is very turbulent right now, and some

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<v Speaker 4>of it is because there are some big structural things

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<v Speaker 4>are happening in the economy. You talk, when I talk

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<v Speaker 4>to businesses, they're reluctant to hire entry level people at

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<v Speaker 4>the same ways that they did before because they think

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<v Speaker 4>things like AI can replace that and they can deploy

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<v Speaker 4>resources for other things.

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<v Speaker 1>And I'm hearing that kind of reticence.

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<v Speaker 4>There's also the reality that during the pandemic, a lot

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<v Speaker 4>of companies ramped up because the demand ramped up, and

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<v Speaker 4>they've been slower to right size. We see a bunch

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<v Speaker 4>of that right sizing happening as well. And then we

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<v Speaker 4>have issues around the labor supply and whether the immigration

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<v Speaker 4>shifts are going to be temporary or permanent, and if

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<v Speaker 4>they're permanent, then we're going to have a lower steady

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<v Speaker 4>state job creation. So for all those reasons, I think

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<v Speaker 4>it's very hard to make a clear statement. And then,

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<v Speaker 4>of course we don't have a jobs number today, so

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<v Speaker 4>we're not getting the data in a timely, timely basis.

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<v Speaker 4>My team tells me it will be April or May

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<v Speaker 4>before we start to be able to draw clear signals

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<v Speaker 4>from the data to really understand.

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<v Speaker 1>What's going on.

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<v Speaker 2>Yeah, we wanted to wish you a happy non jobs

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<v Speaker 2>dated today.

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<v Speaker 3>You started a long and varied career at the FED

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<v Speaker 3>in nineteen ninety five. Since d what have you learned

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<v Speaker 3>about the economy and about inflation?

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<v Speaker 4>Well, I think for the economy, one thing that's true

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<v Speaker 4>is that it is a very complex economy is very large,

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<v Speaker 4>and to understand it you really have to get out

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<v Speaker 4>and see all parts of it and One of the things

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<v Speaker 4>that's been great in my role here is I've had

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<v Speaker 4>a chance.

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<v Speaker 1>To do that.

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<v Speaker 4>I think it's given me a deeper understanding of just

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<v Speaker 4>how people engage and experience the economy and how they

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<v Speaker 4>make decisions to move it forward. In terms of inflation,

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<v Speaker 4>you know, what I've learned is that we really don't

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<v Speaker 4>want to have inflation. Once inflation gets entransient, people's mindset

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<v Speaker 4>changes how the economy evolves. And it's one of the

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<v Speaker 4>reasons why I think that we need to keep our

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<v Speaker 4>policy in a restrictive posture so that we get inflation

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<v Speaker 4>back to two percent. This paramount high prices and the

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<v Speaker 4>prospect of rising prices really do have a lot of

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<v Speaker 4>families on the edge. I mean, you all have reported

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<v Speaker 4>a lot about the K shaped economy. There are lots

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<v Speaker 4>of families that are feeling very precarious right now, and

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<v Speaker 4>that's the source of concern.

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<v Speaker 2>Do you think the economy is becoming more K shaped?

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<v Speaker 1>You know, I don't know more. I mean it's been

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<v Speaker 1>that way for a while.

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<v Speaker 4>Just before the pandemic, I had been talking about this

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<v Speaker 4>and we were trying to find some metrics to really

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<v Speaker 4>detail how there's a split. I used to call it

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<v Speaker 4>the Barbell economy, where either you were at the high

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<v Speaker 4>end or at the low end.

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<v Speaker 1>The K shape is the same thing.

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<v Speaker 4>What I know is that there are a lot of

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<v Speaker 4>families that are precarious and are feeling very uncertain about

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<v Speaker 4>their prospects for the future and the prospects for their

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<v Speaker 4>children for that matter. And that concern, I think does

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<v Speaker 4>underlie a bit of the lower on the low consumer

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<v Speaker 4>confidence that we continue to see being reported. And what

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<v Speaker 4>we'll need to do is really give people reasons to

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<v Speaker 4>be optimistic, to show them where the new jobs are

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<v Speaker 4>coming from, and show them how they get the skills

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<v Speaker 4>to compete.

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<v Speaker 2>For it well.

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<v Speaker 3>This week, Treasury Secretary Besson said the FED has lost

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<v Speaker 3>the confidence of the American people.

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<v Speaker 2>Do you think you.

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<v Speaker 3>Have lost the confidence of the American people in your district?

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<v Speaker 3>Do you hear people raising questions about that?

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<v Speaker 4>That's not been my experience. As I go around the

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<v Speaker 4>sixth district, people tell me we're grateful for what you're doing.

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<v Speaker 4>You have a very hard job, and we want you

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<v Speaker 4>to be as data dependent and as open to information

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<v Speaker 4>so you can make the best judgment that you can.

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<v Speaker 1>Look.

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<v Speaker 4>The world is very complicated it's actually more complicated today

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<v Speaker 4>than it has been my whole time here. So I

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<v Speaker 4>think most people understand that, and they know that we're

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<v Speaker 4>doing the best job that we can under very difficult circumstances.

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<v Speaker 3>Well, you have a unique perspective because when you took

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<v Speaker 3>office the Atlanta FED in twenty seventeen, you were the

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<v Speaker 3>first black president of a regional FED bank. Looking back

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<v Speaker 3>now and hearing the criticism that we get from Washington,

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<v Speaker 3>do you think the Fed was too woke and perhaps

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<v Speaker 3>the inclusive employment idea was a mistake.

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<v Speaker 1>I don't think so.

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<v Speaker 4>Look, what we have is an economy that needs to

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<v Speaker 4>work for everyone, and if we're not mindful about the

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<v Speaker 4>ways that the economy is not working for people, then

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<v Speaker 4>our maximum employment outcome is going to be lower than

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<v Speaker 4>it can be and it doesn't serve the American people

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<v Speaker 4>as well as it could. So I think the focus

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<v Speaker 4>on every American and every Americans experience is exactly the.

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<v Speaker 1>Thing that the Federal Reserve needs to be doing.

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<v Speaker 4>That's different than saying that that is unduly influencing our

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<v Speaker 4>policy decisions.

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<v Speaker 1>And I will say, through this whole.

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<v Speaker 4>Episode, the whole time I've been here, you can look

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<v Speaker 4>at at the market projectors. In the market projections, they

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<v Speaker 4>in many instances we're more extreme than ours, right, And

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<v Speaker 4>so I actually think we've been doing the best that

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<v Speaker 4>we can and we've been data dependent and the way

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<v Speaker 4>we've been for one hundred and some odd years. So

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<v Speaker 4>I don't take on board those arguments.

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<v Speaker 3>Well, the new chair designate, Kevin Warsh says that that

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<v Speaker 3>needs regime change.

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<v Speaker 2>What does that mean to you?

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<v Speaker 1>I have no idea. You're going to have to ask

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<v Speaker 1>him what that means.

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<v Speaker 4>I think we definitely need to be data dependent. Our

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<v Speaker 4>bank has really taken on board the notion that we

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<v Speaker 4>need to go out and engage and talk to business leaders,

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<v Speaker 4>find out how they're engaging with the business, how they're

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<v Speaker 4>making decisions, and that combination we have found to give

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<v Speaker 4>us the best perspective on how the economy is performing.

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<v Speaker 4>I don't think that we should change from that. I

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<v Speaker 4>think we might need to even lean in more to

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<v Speaker 4>those non official data sources as the economy is changing

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<v Speaker 4>so rapidly, because those are all looking backwards and we

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<v Speaker 4>need to be looking forward.

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<v Speaker 3>Well, he's been very critical of what he calls the

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<v Speaker 3>fence mission creep.

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<v Speaker 2>Does he have a point?

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<v Speaker 4>I actually don't even see the mission creep argument. Like

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<v Speaker 4>for me, on the banking side, for example, our job

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<v Speaker 4>is to make sure that every bank that's alive today

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<v Speaker 4>is alive tomorrow, and so we need to make sure

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<v Speaker 4>that banks are thinking about the risks that could cause

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<v Speaker 4>them to need to deploy capital in ways others then

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<v Speaker 4>in loans, and so having conversations about those things I

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<v Speaker 4>think is fully appropriate and we should be doing that.

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<v Speaker 4>We don't tell banks where to land. I've never told

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<v Speaker 4>the bank don't do a loan or don't do that

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<v Speaker 4>sort of thing, and my examiners don't as well.

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<v Speaker 1>I think we're.

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<v Speaker 4>Asking prudent questions to make sure that financial sector business

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<v Speaker 4>leaders are aware of trends that could be introducing risk.

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<v Speaker 3>Warsh also says that he wants to shelve QY and

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<v Speaker 3>significantly shrink the balance sheet and perhaps go back to

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<v Speaker 3>a scarce reserves regime for managing the interest rates of

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<v Speaker 3>the country. Could he do that? Would that be a

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<v Speaker 3>good idea or how hard would that be?

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<v Speaker 1>So I think it's doable to me.

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<v Speaker 4>I was not at the FED when the decision was

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<v Speaker 4>made to go from the scarce reserves to an abundant

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<v Speaker 4>reserve regime. I do know there were tensions and a

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<v Speaker 4>lot of volunteer that happened in the scarce reserve environment,

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<v Speaker 4>and so if you're we're going to move back to that,

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<v Speaker 4>I would hope that there'd be a discussion about how

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<v Speaker 4>to mitigate that volatility, because so much of what we've

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<v Speaker 4>done is just to make sure there's liquidity in the marketplace,

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<v Speaker 4>and that liquidity is actually important to make sure that

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<v Speaker 4>consumers and businesses are not worrying. I can just worry

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<v Speaker 4>about is this a good decision, as opposed to whether

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<v Speaker 4>I can execute on the good decision that leadst a

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<v Speaker 4>different kind of allocation of capital is not helpful.

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<v Speaker 2>Tell me about j Powell and what he means to

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<v Speaker 2>the FED.

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<v Speaker 1>Jay has been great.

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<v Speaker 4>He's a colleague, I consider him a friend, very open

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<v Speaker 4>and very transparent, and he's led the institution.

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<v Speaker 1>He's been at the institution for a long.

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<v Speaker 4>Time, through a lot of significant periods. I think his

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<v Speaker 4>legacy will be quite positive and I'd be sad to

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<v Speaker 4>see him and leave the board if that's what he

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<v Speaker 4>chooses to do. But it's been a great relationship for

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<v Speaker 4>me with him, and I've had been my pleasure to

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<v Speaker 4>serve under him.

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<v Speaker 3>Do you agree with the sentiments he showed when he

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<v Speaker 3>made his video a couple of weeks ago.

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<v Speaker 1>So I'm not going.

0:11:01.080 --> 0:11:04.480
<v Speaker 4>To talk about the specifics of the legal action from

0:11:04.480 --> 0:11:06.840
<v Speaker 4>the Justice Department. What I would say is this, it

0:11:06.920 --> 0:11:12.680
<v Speaker 4>is essential that the FED performance duty mindful to its charge,

0:11:13.040 --> 0:11:16.800
<v Speaker 4>which is stable price and maximum employment to really focus

0:11:17.600 --> 0:11:21.520
<v Speaker 4>and create long term stability and predictability.

0:11:20.760 --> 0:11:21.680
<v Speaker 1>In the US economy.

0:11:22.360 --> 0:11:24.520
<v Speaker 4>And if you want to call it independence or whatever

0:11:24.559 --> 0:11:27.040
<v Speaker 4>you want to call it, you can do that. But

0:11:27.320 --> 0:11:30.200
<v Speaker 4>that's the charge and we need to stay true to that,

0:11:30.920 --> 0:11:35.840
<v Speaker 4>even when people with different horizons and different objectives have

0:11:35.920 --> 0:11:36.719
<v Speaker 4>their views about what.

0:11:36.679 --> 0:11:37.160
<v Speaker 1>We want to do.

0:11:37.760 --> 0:11:42.320
<v Speaker 3>There were questions about the FED and its ethics rules.

0:11:42.920 --> 0:11:45.200
<v Speaker 3>You ranted some problems, as did others with those.

0:11:45.679 --> 0:11:48.000
<v Speaker 2>Was that the rules or was that the individuals who

0:11:48.840 --> 0:11:49.840
<v Speaker 2>created the problems?

0:11:50.200 --> 0:11:53.360
<v Speaker 4>Well, you know, individuals make the rules. I will say

0:11:53.400 --> 0:11:55.560
<v Speaker 4>for me, I thought I was doing the right thing,

0:11:56.240 --> 0:11:59.200
<v Speaker 4>and I found out that I wasn't. So once I

0:11:59.280 --> 0:12:01.600
<v Speaker 4>discovered that I didn't, I wasn't doing that in the

0:12:01.679 --> 0:12:05.240
<v Speaker 4>reporting side, then I changed them and I changed our rules.

0:12:05.240 --> 0:12:06.880
<v Speaker 4>I want to make sure that no one goes through

0:12:06.880 --> 0:12:11.720
<v Speaker 4>that at all, and It's grateful that the IG report

0:12:12.720 --> 0:12:17.400
<v Speaker 4>validated that I wasn't using entire information, and so to me,

0:12:17.520 --> 0:12:19.800
<v Speaker 4>I think we need to make sure the rules are

0:12:19.880 --> 0:12:22.920
<v Speaker 4>clear and they draw up right lines so that not

0:12:22.960 --> 0:12:25.840
<v Speaker 4>that lay people can come in and use them in

0:12:25.920 --> 0:12:28.839
<v Speaker 4>ways that allow them to avoid the challenges that I had.

0:12:29.760 --> 0:12:31.920
<v Speaker 4>And then you know, there may be some people that

0:12:31.960 --> 0:12:34.840
<v Speaker 4>have problems, but that's not what I've seen in terms

0:12:34.840 --> 0:12:35.600
<v Speaker 4>of my experience.

0:12:35.960 --> 0:12:39.440
<v Speaker 3>Well, last question, what would you tell Donald Trump if

0:12:39.480 --> 0:12:42.960
<v Speaker 3>you had the opportunity about j Powell and about the FED?

0:12:44.120 --> 0:12:45.959
<v Speaker 1>I'd say Jay's trying to do the best that he can.

0:12:46.520 --> 0:12:50.760
<v Speaker 4>He's a smart man, he understands markets, uh, and if

0:12:50.840 --> 0:12:54.400
<v Speaker 4>you want him to succeed, you should let him succeed.

0:12:55.480 --> 0:12:57.720
<v Speaker 3>The FED itself, do you think it is under threat

0:12:57.720 --> 0:12:59.920
<v Speaker 3>from this administration threat?

0:13:00.080 --> 0:13:00.560
<v Speaker 1>I don't know.

0:13:00.600 --> 0:13:04.240
<v Speaker 4>What I would say is my whole time here, and

0:13:04.280 --> 0:13:06.080
<v Speaker 4>I think that most of the history of the FED,

0:13:06.360 --> 0:13:08.440
<v Speaker 4>there have been people who thought the FED should do

0:13:08.480 --> 0:13:11.199
<v Speaker 4>other things and talked about.

0:13:10.880 --> 0:13:12.520
<v Speaker 1>That, and we called them out.

0:13:13.520 --> 0:13:17.240
<v Speaker 4>This is another one of those times, and we need

0:13:17.280 --> 0:13:19.160
<v Speaker 4>to be mindful and we need to be solid and

0:13:19.280 --> 0:13:24.440
<v Speaker 4>resolute to understand that. That's part of that comes with

0:13:24.480 --> 0:13:29.640
<v Speaker 4>the territory, and with that territory then requires our strength

0:13:30.000 --> 0:13:34.559
<v Speaker 4>and our resoluteness to stay focused on what we've.

0:13:34.360 --> 0:13:34.959
<v Speaker 1>Been asked to do.

0:13:35.559 --> 0:13:37.720
<v Speaker 3>We fail, Bastic, thank you very much for joining us

0:13:37.760 --> 0:13:39.960
<v Speaker 3>as president for another couple of weeks.

0:13:39.960 --> 0:13:41.560
<v Speaker 2>I've got at landa fed